"[E]ven when outward uniformity is achieved, ... uniform application of the agreed rules is by no means guaranteed, as in practice different countries almost inevitably come to put different
interpretations upon the same enacted words."[1]

"[H]ow [does one] determine which interpretation should be preferred when the CISG itself
gives rise to different autonomous interpretations [?]" [2][page 299]

A hopeful note was expounded 250 years ago by Lord Mansfield when he stated that "mercantile law ... is the same all over the world. For from the same premises, the sound conclusions of reason and
justice must universally be the same."[3] It is this view of the universality of commercial practice
that the success of a uniform international sales law is hinged. Critics of such a view assert that such
uniformity efforts are both unwise and doomed to failure. Nonetheless, the United Nations
Convention on Contracts for the International Sale of Goods ("CISG") was adopted on April 11,
1980, under the auspices of the United Nations Commission on International Trade Law
("UNCITRAL").[4] Critics have argued that the benefits of uniform international business law
are minimal,[5] and that national courts will inevitably be the conscious or subconscious victims
of homeward trend.[6] Homeward trend reflects the fear that national courts [page 302] will
ignore the mandate of autonomous-international interpretations of the CISG in favor of
interpretations permeated with domestic gloss. It is most difficult for a court to "transcend its
domestic perspective and become a different court that is no longer influenced by the law of its own
nation state."[7]

An example of homeward trend jurisprudence is the Italian case of Italdecor SAS v. Yiu's Industries.[8] The court ignored the interpretive methodology [9] of the CISG by failing to review
pertinent foreign cases and arbitral decisions. For example, the court failed to seek guidance from
existing cases dealing with the determination of fundamental breach.[10] If any semblance of
applied uniformity is to be achieved, it is imperative that courts look to relevant foreign decisions for
guidance. Whether as voluntarily binding precedent or as persuasive precedent,[11] courts should
[page 303] review CISG jurisprudence before rendering a decision. In the case of diverging
interpretations, the interpreter should select, modify, or reconcile such decisions through the proper
use of the CISG's interpretive methodology:

"[C]ourts [should serve] two primary functions [in their roles as informal appellate courts.] First,
they would look to decisions of foreign courts for guidance. Second, they would actively unify
international sales law by distinguishing seemingly inconsistent prior decisions and by harmonizing
differences in foreign interpretations."[12]

Simply put, courts' decisions should separate well-reasoned cases from the poorly reasoned ones,
explain why they are so, and give persuasive effect to the cases using the proper interpretive
methodology.

One commentator concluded that the Court's decision in Italdecor SAS was "cryptic, and parochial,
and it is written in a way that is hard to understand, even for an Italian."[13] The court not only
failed to review foreign case law on the CISG, but also failed to use relevant articles of the CISG.
In one instance, the court applied Article 49(1) without analyzing the related Article 25.[14]
Article 49(1) allows for the avoidance of a contract in the event of a fundamental breach. The court
held that an untimely delivery was fundamental without applying Article 25 which provides the [page 304] CISG's parameters for determining whether a breach is fundamental. Without the use of the
Article 25 template of "substantiality" and "foreseeability," and without the guidance of foreign cases
applying the Article 25 template, there is no deterrent to a homeward trend perspective of
fundamentality.

The answer to this debate between the Mansfield view and the "realist critique" is somewhere in the
middle. The likelihood of substantive uniformity of application is unrealistic, but the utter failure of
the CISG as a device to remove legal impediments to international trade is equally implausible. This
middle view is found in the ongoing development of CISG jurisprudence. It is the jurisprudence of
the CISG that this article seeks to uncover in gauging the impact of the CISG on international sales
law.

The focus of this article is not whether the CISG mandates or should mandate absolute uniformity
of application. The literature on this subject is quite extensive.[15] Instead, this article
recognizes that many CISG provisions are the product of compromise and thus we ask whether these
compromises have proven to be effective or have resulted in a chaotic jurisprudence. How have the
articles of the CISG actually been interpreted and applied by the various national courts? At the
interpretive level, is there evidence of convergence or divergence among the national courts?

To this end, the remainder of this Introduction will examine the special characteristics of the CISG
as an "international code" including the importance of the CISG as an international convention and
legal code meant for uniform application. The importance of defining a standard for measuring
uniformity of application will be discussed along a continuum between absolute and relative standards
of uniformity. The discussion then focuses on the importance of autonomous interpretation, as
intended by the drafters of the CISG, to the goal of a relative uniformity of application. The
Introduction concludes with a discussion of the more expansive use of the CISG as "soft law." This
use of the CISG as evidence of customary international law offers an avenue for courts and arbitral
tribunals to bridge differences between domestic law regimes. [page 305]

The review of CISG jurisprudence in Parts II through VI will highlight the problems of non-uniform
applications. This will be done by highlighting poorly reasoned opinions as well as those that are a
product of better reasoning. The poorly reasoned opinions are generally characterized by decisions
that merely apply the legal concepts of the Court's domestic legal system. The exemplary opinions
are characterized by the application of CISG interpretive methodology, as discussed in Part II, in
pursuit of autonomous interpretations. Finally, numerous arbitral cases will be examined to assess
the application of the CISG by arbitral panels.

Parts II through VI, however, provide a more practical view of the CISG at work. These sections are
intended to provide a descriptive review of the jurisprudence that has developed around the major
provisions of the CISG as well as the raw material necessary to judge the CISG's functionality in
lowering the legal obstacles to the international sale of goods. This review is meant to illustrate the
types of issues and interpretation problems encountered by national courts and arbitration tribunals
in the 15 years since its adoption. It also recognizes that courts have developed specific default rules
to make the CISG more functional. The use or misuse of CISG interpretive methodology and the
development of specific default rules will be highlighted throughout the remainder of the article.

Parts III thorough VI review CISG jurisprudence according to the main substantive areas of the
Convention: Contract Formation (Part III), Obligations of Buyers (Part IV), Obligations of Sellers
(Part V), and Common Obligations (Part VI). In each of these Parts, the provisions with the largest
volume of case and arbitral law are given the most coverage. In Part III, the review focuses on the
writing requirements, the use of extrinsic evidence, and offer-acceptance rules, including the battle
of the forms scenario. Part IV concentrates on the duty of the buyer to inspect and give timely notice
of non-conformity (defect), and the civil law concept of nachfrist notice as codified in Articles 47 and
48. Part V discusses sellers' obligations, warranty provisions, and the buyer remedies for seller's
breach. Part VI includes the passing of risk, fundamental breach, anticipatory breach, and
consequences of breach. The consequences of breach observe the calculation of damages, doctrines
limiting damages recovery, and the excuse of "impediment" found in Article 79. Through this
analysis, divergent interpretations, CISG interpretive methodology, and the development of specific
default rules are highlighted.

Part VII's "Summary and Observations" concludes that the CISG is an evolving legal code.
Consequently, its jurisprudence reflects courts' confusion and methodology to contend with the
CISG's perceived shortcomings through gap-filling measures. Because case law commonly brings
necessary depth and clarity to statutory acts, Part VII offers five examples of such developing
jurisprudence and the persistence of [page 306] homeward trend reasoning in CISG opinions. This
Part further posits that homeward trend reasoning as a solution, despite its long term deficiencies.

Furthermore, this article concludes in Part VII that the level of disharmony associated with divergent
national interpretations is acceptable because national interpretations impact the effectiveness or
functionality of the CISG. Some divergence in interpretation is expected and acceptable given the
difference in national legal systems and in the very nature of codes. This divergence is expected not
only because of the codes multi-jurisdictional application, but also because -- like the civil and
commercial codes of Europe and the United States ("UCC") -- the CISG is an evolving, living law.
As such, it provides for the contextual input of the reasonable person,[16] including the
recognition of evolving trade usage,[17] in the re-formulation and application of its rules. The
benefit of such a dynamic, contextual interpretive methodology is that the code consistently updates
its provisions in response to novel cases and new trade usages. This process should ultimately
overcome the initial divergent interpretations and result in an effective and functional international
sales law. The success of the living, contextual nature of the CISG is dependent upon courts
balancing the need for flexibility in application against the need to minimize divergent interpretations
to ensure that the CISG remains attentive to its mandate of uniformity.

We can look to the UCC as an example. It is held up as an example of a successful harmonization
of commercial law among multiple jurisdictions. In fact, different state court systems have rendered
divergent interpretations of UCC provisions. Despite such divergence, can we still say that the UCC
has served its function of uniformity?[18] The answer depends on one's definition of uniformity
or harmonization. The CISG has worked to harmonize international sales law despite the production
of [page 307] divergent interpretations and despite failing the test of absolute uniformity.
Nonetheless, it remains an enduring code that evolves with modern commerce and continues to be
an intrinsic part of international trade.

A. CISG as International Code

It is important to understand that the CISG is written in the form of a convention-code [19] and
not as a uniform or model law. The paramount characteristic of a convention is its international
character. This characteristic implies that its overall purpose is the standardization of law at a level
above that of national law.[20] This standardization provides the important benefit of the
longstanding problem of conflict of laws among national states.

In the short term, however, international conventions often produce a problem referred to be
Professors Enderlein and Maskow as the cleavage of statutes.[21] This is caused by the fact that
although the CISG is not meant to be integrated into national legal systems, it is incorporated and
applied by national courts. The presence of two sales laws within a single legal system inevitably
produces norm conflict. The differences in the use of general contract and interpretation principles,
along with substantive differences in the formal legal rules, cause a degree of conceptual dissonance.
It is hoped that with any new trans-jurisdictional standardizing law, whether in the form of a uniform
law, model law, or convention, the effect of such dissonance will diminish over time. In the end, it
is hoped that a solid jurisprudential framework will develop in which the interpreter will "manage with
the standardizing rules"[22] independently of the influence of divergent domestic law.

The international nature of the CISG is demonstrated by the fact that its jurisdiction is transaction-focused and not party-focused. The fact that a transaction crosses national borders is the linchpin of
CISG jurisdiction -- not the nationality of the parties. For example, Article 10(a) provides that the
place of business is that which has the closet relationship to the transaction. The nationality of the
parties, the place of incorporation of a party, and the place of its headquarters are largely irrelevant.
Article 10(a) states the rule that "the nationality of the parties is not to be taken into [page 308]
consideration"[23] in determining the applicability of the CISG. Therefore, a contract between
two nationals of the same country may be subject to the CISG if it involves a trans-border shipment
and one of the parties has its CISG "place of business" in another country.[24]

Another example of the international nature of the CISG is its exclusion of types of sales transactions
that are more likely to be exposed to the peculiarities of national laws. Article 2 excludes consumer
sales, auction sales, sales of ships and aircraft, and forced or judicially mandated sales. The rationale
behind excluding these types of sales is that they are subject to special national regulations. Examples
of such specialty laws are consumer protection laws and special registration laws (ships and aircraft).
[25]

B. Principle of Uniformity

A recent article is entitled: Is the United Nations Convention on the International Sale of GoodsAchieving Uniformity?[26] The author correctly replies that the question itself is improper. The
answer is yes and no depending on how the word uniformity is defined. If by uniformity one means
substantive or absolute uniformity of application, then the answer is a commonsensical no. The better
question is: Has the CISG become a functional code? Have functional default rules developed
through the application of CISG's general principles? Has it resulted in at least a manageable level
of uniform application to have decreased the legal impediments to international sales?[27] Finally,
what is the likelihood of greater uniformity of application in the future?

1. Strict Uniformity versus Relative Uniformity

The degree that the CISG has been successful at unifying international sales law has been debated.
In order to gauge its perceived impact on unifying international sales law, a standard is needed in
which to measure CISG jurisprudence. Numerous standards can be offered including the [page 309]
standards of strict [28] or absolute uniformity,[29] relative uniformity, and the lessening of
legal impediments to international trade.[30] "It is generally acknowledged that the existence of
different national legal systems impedes the development of international economic relations with
complicated problems arising from the conflict of laws."[31] We believe that the success of the
CISG should be measured using a standard of relative uniformity or a standard of the lessening of
legal impediments to trade. Thus, a relative or useful level of uniformity [32] should be the
benchmark to measure the success of the CISG. This is what Professor Miller has referred to as "a
more specific goal [of] uniformity." The fact that Article 7 prefaces its uniformity mandate with
"regard has to be had"[33] implies that a standard below strict uniformity in application was
envisioned. The uniformity mandate itself indicates that strict uniformity is not a realizable goal.
Instead of using active words like establish or create, the CISG merely states the "need to promote
uniformity in its application ... ."[34] The benchmark of relative or useful uniformity is superior
to the previous system of private international law characterized by the full panoply of different
domestic laws and systems.

The CISG was never intended to achieve the lofty goal of absolute uniformity. In the words of Johan
Steyn, "[n]o convention can eliminate uncertainties in its application. But a convention such as the
Vienna Sales Convention will tend to reduce differences and to eliminate uncertainty."[35] If it
helps to relieve the impediment noted above of conflicts of national laws then it is to be considered
a progressive, albeit a transitory, step to uniform private international law. [page 310]

2. Uniformity through Original or Autonomous Interpretation

The interpretive methodology of the CISG mandates that interpreters seek original or autonomous
interpretations. It is hoped that such autonomous interpretations, divorced from the idiosyncrasies
of domestic jurisprudence, will result in more truly supranational law. One of our co-authors
previously wrote that "[t]he Convention is meant to be interpreted based upon its uniqueness and not
its similarities to any one of the legal systems from which it was created."[36] As discussed
earlier, the CISG is an example of a convention qua code. The importance of the fact that the CISG
is a convention pertains to its international character. This international character calls for a non-domestic, autonomous interpretation of CISG rules.

The importance of convention qua code is that its international character is to be fused with the
interpretive methodology common to all codes.[37] Professor Scott defines a code as "a
preemptive, systematic, and comprehensive enactment of a whole field of law."[38] Thus,
problems of interpretation such as gaps in the code are to be solved by means internal to the code.
A court or arbitral panel is given the duty "to use the processes of analogy and extrapolation to find
a solution consistent with the purposes and policy of the codifying law. In this way, the code itself
provides the best evidence of what it means."[39]

The CISG invites the interpreter to construct autonomous interpretations through its use of
nomenclature independent of any domestic legal system. The CISG uses terms such as contract
"avoidance,"[40] and language such as "among other things,"[41] "extent of one party's
liability to the other,"[42] and "handing the goods over."[43] CISG phraseology is relatively
vague and abstract, which invites original interpretations. Simultaneously, the CISG's flexibility
enables a wide scope for application [page 311] and reasonable but divergent "national"
interpretations. This problem of divergent autonomous interpretations will be a focus of our CISG
jurisprudential review.

3. CISG as Soft Law: Uniformity through the Prism of Customary International Law

One avenue to greater implementation and uniformity is the use of the CISG as soft law.[44]
Two uses of the CISG as soft law include (1) the voluntary use of the CISG as a choice of law by
private parties not automatically subject to CISG jurisdiction and (2) the use by courts and arbitral
panels of the CISG as evidence of international customary law. One question posed by CISG
jurisprudence is whether the CISG has been used where it is not mandatory law.[45] The major
reporting services, CLOUT, Pace Law School, and Unilex, among others, report arbitral panel
decisions.[46] These reports, although not comprehensive, indicate CISG usage as a source of
soft law or customary international law. Because arbitral panels are often not required to apply a
given national law, they are less susceptible to the legal centricity inherent in courts operating within
a domestic legal system.[47] To this end, this article's analysis draws from both case law and
arbitral decisions. [page 312]

Parts III through VI offer a selective but comprehensive review of CISG jurisprudence.[48] They
allow an assessment of the diverging interpretations problem by national courts. Before assessing the
uniformity of CISG jurisprudence relating to its substantive rules of contract, an understanding of the
interpretive methodology provided by the CISG is necessary. Failure to understand and apply the
CISG's interpretive methodology increases the likelihood of divergent interpretations through the
improper use of domestic methodologies and legal constructs. This holds true for any code, domestic
or international. Professor Hawkland, referring to the Uniform Commercial Code, asserts that "a
court should look no further than the code itself for solution[s] to disputes governed by it -- its
purposes and policies should dictate the result even where there is no express language."[49]
CISG interpretive methodology provides a template for addressing substantive gaps or issues of law
not directly (expressly) dealt with by the CISG. This template includes analogical reasoning by using
CISG Articles not directly related to the issue at bar and the use of the general principles of the CISG
in fabricating default rules.[50]

The notion of analogical reasoning is not expressly mentioned in the general provisions. However,
such a methodology is implied in any comprehensive code. Furthermore, Article 7(2) states that
"questions concerning matters governed by this Convention which are not expressly settled in it are
to be settled in conformity with the general principles on which it is based." A broad interpretation
of this methodology would require the use of express and implied general principles. General [page
313] principles cover all CISG provisions and can be utilized to uncover implied principles that
underlie specific provisions. These principles -- express or implied -- are to be used for guidance in
the interpretation of specific CISG provisions. This entails analogical reasoning in order to ensure
that article-specific interpretations fit within the framework of the CISG as a whole.[51]

There is a debate as to which priority these rules have in the interpretive methodology of codes.
Some argue that general principles are the first recourse to filling in a gap or ambiguity in a code
provision.[52] Others argue that reasoning by analogy takes precedent especially when a solution
provided in one code provision is analogous to an issue presented under another provision.[53]
The best interpretive methodology would include both types of analysis.[54] The two levels of
the interpretive discourse are likely to merge in most application. It is the recognition and application
of general principles underlying specific CISG articles that make analogical reasoning a functional
methodology. The third level of the CISG's interpretive methodology is recourse to private
international law. Only after the failure to provide a CISG-generated solution from analogical
reasoning or application of general principles should a court resort to private international law
(domestic law).[55] The last resort status of domestic sales law is meant to deter the threat of
homeward trend. This is especially crucial in the case of the CISG due to the fact that its provisions
were the product of intense debate and compromise. The temptation exists that in cases of
application, especially in areas of ambiguity or gaps, to seek [page 314] the familiarity of domestic
default rules.[56]

A. Interpretive Methodology

As highlighted above, the CISG provides an interpretive methodology for interpreting and applying
its substantive rules. The spirit of this methodology is that of excluding recourse to domestic legal
methodologies. This is implicit in the view that the CISG directs decision-makers to develop
autonomous interpretations[57] of CISG provisions. It is only in this way that the CISG can rise
above the inherent differences between national contract laws and legal systems. Article 7(1) states
that the CISG is to be interpreted in "good faith," "to promote uniformity," and with regard "to its
international character."[58] The more difficult questions are not the fabrication of autonomous
interpretations of the CISG but the development of different autonomous interpretations. This is
especially due to the fact that the CISG is a product of studied ambiguity or compromise and that
there are numerous substantive gaps in its rules. The courts and arbitral panels will invariably face
issues that are within the scope of the CISG but where the CISG fails to provide an express rule.[59] Once again the above described methodology of analogical reasoning and general principles
is consistent with the presumption that CISG provisions are to be interpreted broadly. A mandate
of broad interpretation is consistent with the code-based interpretive methodology.[60]

B. General Principles

In order to diminish the frequency of divergent national interpretations, the CISG mandates the use
of general principles, both express and implied, found within its Articles. The CISG displays two
noticeable characteristics relevant to legal interpretation. First, it fails to [page 315] explicitly
enunciate many of its general principles. Article 7(2) states that if "matters governed by [it] are not
expressly settled in it [they] are to be settled in conformity with the general principles by which it is
based."[61] The general principles can be characterized as either general or specific and either
express or implied. The general, expressed principles are found in Article 7(1). It provides that "[i]n
the interpretation of this Convention, regard is to be had to its international character and to the need
to promote uniformity in its application and the observance of good faith in international trade."[62] The general principle of international character is directed at preventing the problem of
homeward trend discussed earlier.[63]

An example of an implied general principle is "the principle of favoring the continuation of a
contract."[64] The fact that goods can only be rejected for fundamental defects requires buyers
to accept defective goods in most instances. The restrictive nature of fundamental breach is discussed
in Part VI.B.1.[65] The importance of completing the transaction in long distance sales, as
compared to the broad right of rejection under the perfect tender rule for domestic sales,[66]
limits the right of avoidance under the CISG. This is somewhat offset by the incorporation of a
uniquely non-common law remedy of price reduction. Thus, the buyer is forced to complete the
transaction but is allowed to unilaterally reduce the price by the diminishment of value related to the
defect. "The principle [of continuation of performance] can be extracted from Articles 34, 37, 48,
49, 51, 64, 71 and 72 of the CISG."[67]

The Helsinki Court of Appeals recognized the importance of continuation of contract within the
principle of loyalty. "The so-called [page 316] principle of loyalty has been recognized in scholarly
writings. According to the principle, the parties to a contract have to act in favor of the common
goal; they have to reasonably consider the interests of the other party."[68] In essence, each party
owes a duty of loyalty to the other party to preserve the viability of the transaction. From such a
duty, the court recognized an implied general principle in an expanded notion of duty to continue a
sales relationship beyond the discrete individual sales transactions. The case involved a buyer who
purchased carpets for resale on an ad hoc basis. The seller abruptly ended its relationship with the
buyer. The court held that on the basis of a two-year business transaction, the buyer's "operations
cannot be based on a risk of an abrupt ending of a contract."[69] Therefore, the seller was
restricted in its right to not sell to the buyer despite the fact that there was no agency or long-term
supply contract in place. The court reasoned that the buyer had "obtained de facto exclusive selling
rights."[70] Such implied rights, based upon good faith and trade usage, make the seller of
multiple discrete transactions susceptible to damage claims under Article 74.[71] In essence, the
court held that principles of reasonableness and trade usage require an extended notice of termination
where damages to a buyer are foreseeable, regardless of the fact that the discrete contract failed to
require such notice.[72]

Many of the CISG's rules are open-textured and allow application of contextual inputs such as trade
usage and custom.[73] For example, it makes repeated use of the "reasonableness standard" in
its gap-filling provisions. The authors counted thirty-eight instances where the reasonableness [page
317] standard is imposed by the rules of the CISG.[74] Open-ended rules derive their content
from post-hoc application to real world cases.[75] Such rules allow for expansive interpretations
to deal with novel cases and for use in analogical reasoning. The analogical reasoning can be used
to fill in gaps within the scope of the CISG. As discussed above, one way this is done is through the
deduction of general principles underlying the CISG in order to interpret CISG rules.[76]

Because many of the CISG rules are open-ended, despite the fact that it is in code format, it is
important to interpret its provisions as part of a whole. In interpreting an open-ended rule, the
interpreter should not only recognize the underlying rationales for that particular CISG provision, but
should also interpret general principles and other relevant provisions.[77][page 318] This methodology
was applied in an Austrian court decision.[78] The court held that the payment of interest was
within the scope of the CISG [79] even though it was not expressly explained. The court
concluded that any issues regarding the payment of interest should be settled according to the general
principles underlying the CISG. The court then recognized "full compensation" as an underlying
general principle that required payment of interest.[80] The court further supported its decision
by recognizing payment of interest as a trade usage permitted under Article 9(2).[81]

Article 7 requires that CISG interpretations should be accomplished with regard to "the observance
of good faith in international trade."[82] The legislative history of Article 7 demonstrates that
the inclusion of a duty of good faith was the subject of contentious debate.[83] The result was
the muted compromise of including good faith principle in the interpretive methodology of the CISG.
Despite the confinement of the express duty of good faith to CISG interpretation, courts and arbitral
panels have implied a general duty of good faith to dealings between contracting parties. The
Columbia Constitutional Court enunciated a broad good faith principle by referencing its own Magna Charta:

"Equally, the exercise of the commercial activity that the individuals develop with other citizens
of different States must fit the principle of good faith, just as the Convention stipulates in
paragraph number one in article 7. This principle should not only be observed in the contractual
relationships or negotiations, but in the relationship between individuals and the State and in the
procedural performances. Indeed, ... good faith, in conformity with article 83 of the Magna
Charta is presumed ... ."[84][page 319]

A Hungarian arbitration court ruled that "the observance of good faith in not only a criterion to be
used in the interpretation of the CISG but also a standard to be observed by the parties in the
performance of the contract."[85] The scholarly literature has generally favored the expanded
use of Article 7's good faith principle to dealings between the parties.[86] One argument is that
the use of the reasonableness standard throughout the CISG inherently requires the application of
good faith to the conduct of the parties.[87] In support of this argument, the Secretariat
Commentary references CISG provisions that are "manifestations of the requirement of the
observance of good faith."[88] The reasonable person is seen as always acting in good faith.
Moreover, the recognition of trade usage in the interpretive process has historically been premised
upon the commercial norm of good faith and fair dealing.[89] In the area of acceptance, a Swiss
court held that good faith is the key to determining whether a sender may assume the recipient of the
confirmation letter accepted the terms of the letter.[90] A recent Belgian appellate court
characterized Article 40 as the application of "the good faith principle," noting that if the seller knows
of the non-conformity and fails to reveal it, he cannot fall back upon the buyer's failure to tell him
what he knew already.[91]

C. General Default Rules and Specific Default Rule Creation

Many of the CISG articles provide very general, vague default rules tied to the concept of
reasonableness. It is interesting to evaluate whether CISG jurisprudence has begun to fashion more
specific, functional default [page 320] rules.[92] The alternative approach is a hasty devolution
to the rules found in domestic legal systems. An interpreter will be tempted to argue that since the
CISG fails to provide specific default rules for defined categories of cases, then recourse to more fully
developed default rules in domestic law is appropriate. This would indeed be an inappropriate
presumption. The general principles of uniformity and international character enumerated in Article
7 are intended to prevent premature recourse to domestic law.

An exercise akin to the development of specific default rules is the creation of factors that can be
applied in the analysis of various types of cases under the scope of CISG provisions. These factors
provide substance to the borderless reaches of reasonableness and enable the formulation of specific
default rules. A Swiss Court enunciated a number of such factors by quantifying Article 38(1)'s
mandate that a buyer must inspect delivered goods "within a short a period as is practicable in the
circumstances."[93] The court listed a number of factors that can be used to categorize "in the
circumstances." They include:

"In determining the time limit for the examination of the goods, one must consider the individual
circumstances and the adequate possibilities of the parties. This includes, e.g., the place at which
the goods are located and the way in which they are packaged. The nature of the goods
themselves is particularly relevant. Goods which do not change their quality or go to waste can
be expected to be examined for their quantity and type immediately.

"An immediate thorough examination of the quality cannot reasonably be expected if the buyer
is busy with other dealings ... . Where a large quantity of goods is delivered, the buyer does not
need to examine the entire load but must test samples. Where an examination may damage the
substance of the goods, the buyer must check the weight, appearance, etc. In addition to that,
she must also take samples even if the examined goods are destroyed in the process or cannot be
used [page 321] afterwards. However, the number of samples taken in such cases can be reduced
to a few per thousand. This rule also applies to goods in their original packaging which cannot
be sold after being opened."[94]

The development of relevant factors is vital to the full functioning of CISG rules. A factors analysis
provides the necessary flexibility needed to apply a generally worded default rule to a variety of fact
patterns.

Another example can be found in the German Supreme Court's interpretation of the excuse doctrine
of impediment.[95] Article 79 allows a party a legal excuse in the event of the unexpected
existence of an "impediment beyond his control."[96] The CISG fails to define what it means by
an "impediment" and "beyond his control." The court reasoned that the word impediment does not
allow for a reallocation of contract risk. In this case, the seller argued for impediment due to the acts
of a third party supplier that it had hired to fulfill its contract. The court rejected third-party non-performance as a ground for impediment. It defined "beyond control" more broadly than mere
physical control. According to the court, it also included "economic risk control."[97] Since the
third-party supplier was within the "seller's sphere of influence"[98] the economic risk remained
with the seller. The seller could not argue impediment simply because it could not physically control
the actions of a third party.

The CISG embodies a modern approach to contract formation, recognizing that contracts are often
concluded quickly and without a formal writing. The CISG provisions dealing with contract
formation are found in Part II of the convention which contains the rules of formality and offer-acceptance. The rules of formality refer to the writing requirements, definiteness of terms, and types
of admissible evidence. Offer-acceptance rules include issues dealing with the mechanics of
formation, the battle of the forms scenario, and the firm offer rule. Article 29, found in Part III of
the CISG, is concurrently analyzed for contract modification requirements.

A. Writing Requirements and the Parol Evidence Rule

Consistent with its freedom of form approach, the CISG does not require a writing for the formation
of a contract. In the area of contract modification, it requires neither a writing nor consideration.
Articles 11, [page 322] 12, 13, and 29 contain the CISG's writing, evidence, and consideration
requirements for formation, modification and termination. Although freedom from formalities is the
rule of both Articles 11 and 29, these articles allow Contracting States to preserve writing
requirements if they wish to do so. Moreover, the Convention's principle of party autonomy allows
parties to impose their own requirements.

Article 11 of the Convention states that a "contract of sale need not be concluded in or evidenced by
writing and is not subject to any other requirement as to form."[99] Consequently, under the
Convention, oral agreements are valid.[100] Article 12 allows a Contracting State to make a
declaration under Article 96 of the Convention in order to exempt itself from the informalities of
Articles 11 (addressing issues regarding formation and proof of a contract's existence), Part II
(addressing offer and acceptance) and Article 29 (addressing modification and termination).[101]
Article 96 declarations are available, however, only to Contracting States "whose legislation requires
contracts of sale to be concluded in or evidenced by writing."[102] Moreover, Article 96 requires
that at least one of the parties to the contract have its place of business in the declaring State.
[103] Because Article 12 refers only to formalities required under Articles 11 and 29 and Part II,
other notices or indications of intention unrelated to these Articles are not affected by an Article 96
declaration. CISG default rules on formality not relating to Articles 11, 12, and Part II remain in place.[104]

Article 13 specifies that telegrams and telexes qualify as "writings."[105] Given the drafters'
concern for efficient communication, courts interpreting the CISG would most likely recognize more
modern forms of electronic communication, not anticipated at the time of drafting.[106] When
a [page 323] Contracting State makes an Article 96 declaration, private international law determines
whether a writing is necessary and what constitutes a writing. If domestic law applies because of a
reservation pursuant to Articles 12 and 96, Article 13 demands that "domestic form requirements are
always satisfied by the use of telegrams and telexes."[107]

Although a writing is not required in general, some international conventions may override the CISG
with regard to specific provisions in a contract for the sale of goods. For example, the New York
Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 requires
arbitration clauses to be in writing and the Brussels Convention on Jurisdiction and Enforcement of
Judgments in Civil and Commercial Matters requires jurisdiction clauses to be in writing. In such
cases, the CISG may apply to determine whether the writing requirement is satisfied.[108]

The CISG contains no express statement on the role of parol evidence. Article 11, however, provides
that a contract "may be proved by any means, including witnesses."[109] This provision indicates
that the CISG admits not only oral testimony related to the contract but also evidence such as
negotiations, the intent of the parties, prior course of dealing, and conduct. Article 8 of the
Convention instructs that a party's statements and conduct are to be interpreted according to the
subjective intent of the party "where the other party knew or could not have been unaware what that
intent was."[110] Otherwise, intent is determined according to a reasonable person standard.
[111] To determine intent, courts must consider "all relevant circumstances."[112] CISG's
permissiveness, demonstrated by Article 8's instructions to consider "all relevant circumstances" and
Article 11's statement that a contract may be proved by "any means," is contrary to the common law
approach of excluding parol evidence.

Although contracting parties may insist on certain formalities for [page 324] modification or termination,
the CISG does not require any.[113] The CISG makes no reference to consideration which is
required for modification under common law. Article 29(1) which states that "a contract may be
modified or terminated by the mere agreement of the parties."[114] If parties have prescribed
formalities in a written agreement, however, Article 29(2) makes it clear that such formalities must
be observed in order to make the amendment or termination valid. A writing requirement, such as
a no oral modification clause, however, will be ignored if one party's conduct causes the other to rely
on oral statements or other conduct.[115]

1. The Writing Requirements of Articles 11, 12, and 13

The issues that courts have addressed regarding writing requirements include whether there is
sufficient evidence that a contract exists, which law apples to determine whether writing requirements
must be satisfied when one party is subject to an Article 96 declaration, and how courts should
address national parol evidence rules to determine the existence, scope, modification or termination
of a contract.

The lack of a writing requirement under the CISG does not pose many problems because so many
signatory countries have already abandoned the statute of frauds concept even before adopting the
Convention.[116] A notable exception is the United States, where the Uniform Commercial Code
still requires that contracts for the sale of goods for more than $500 be in writing.[117] Although
Article 11 makes clear that a contract may be evidenced by "any means," national courts must still
consider whether the evidence provided is sufficient to determine that a contract exists. A U.S. court
stated that under the CISG, a "contract may be proven by a document, oral representations, conduct,
or some combination of the three."[118] An unsigned fax,[119] an invoice together with
documents for the [page 325] carriage of goods,[120] telegrams and telexes,[121] conduct such
as the opening of a letter of credit,[122] and witnesses' testimony about the intent of the parties
[123] have all been introduced to prove the existence of a contract. A few courts have insisted
that the parties should "get it in writing," but such comments appear to be made merely as cautionary
statements.[124]

Articles 8 and 9 assist courts in determining whether an oral agreement has been validly concluded.
These provisions embody the CISG's emphasis on upholding the parties' intentions and expectations
as well as trade usage and industry customs. A case decided by the Helsinki Court of First Instance
and upheld by the Court of Appeals found that an oral agreement regarding an exclusive
distributorship arrangement was validly concluded and that the one party had failed to give proper
notice of termination.[125] In reaching its decision, the court considered "all relevant
circumstances" as required by Article 8.[126] This included the incorporation into the contract
of any "usage of which the parties knew or ought to have known and which in international trade is
widely known to, and regularly observed by, parties to contracts of the type involved in the particular
trade concerned."[127] A U.S. court used a similar approach to determine whether, as one party
claimed, it was "a well-established custom in the industry ... to rely on implied, unwritten supply
commitments."[128] Although the court did not refer specifically to Articles 8 or 9, it cited the
CISG's "strong preference for enforcing obligations and representations customarily relied upon by
others in the industry," as well as Article 7(1)'s focus on observing [page 326] "good faith in
international trade."[129]

A major complication in the CISG's "no writing requirement" regime is Article 12's allowance that
Contracting States may exempt themselves from the informalities of Articles 11 and 29. The use of
an Article 96 declaration to exempt a Contracting Statement from Article 11 does not necessarily
dictate that a writing will be required. Two interpretations have been suggested regarding which law
applies for Article 12 purposes. The first interpretation is that form requirements will always be
preserved if one of the Contracting Parties has made such a declaration.[130]

The second interpretation is that the forum's conflict of law principles pertain and the applicable
national law determines whether a writing is required for a contract to be enforceable. If the
applicable law points to the state that requires a writing, then the formalities must be observed. If the
private law points to a state that does not have a writing requirement or to the CISG, then no writing
is required. For example, let's look at a Hungarian case because Hungary is a state that has made an
Article 96 declaration.[131] Here, the Metropolitan Court of Budapest held that the contract
concluded over the telephone was valid because the law of the forum state, Germany, pointed to
German law which does not require a writing.[132] Similarly, a Dutch court found that a contract
based on an oral offer was valid despite the fact that one of the parties had its place of business in the
Russian Federation, a state which had made an Article 96 declaration, because the private
international law of the forum pointed to the law of the Netherlands, which required the court to
apply the CISG as adopted by the Netherlands.[133][page 327]

While Article 12 applies only to those States that qualify for an exemption through an Article 96
declaration, parties may impose their own private statute of fraud requirements. In doing so, the
party imposing the writing requirement must be sure that the other party is aware of the requirement.
An Austrian court held that where the seller had standard terms that required acceptance to be in
writing, such terms would apply only if the buyer had knowledge of such standard terms, otherwise
the oral acceptance would not prevent the conclusion of a valid contract, under the CISG.[134]
This notion of particularized express consent is further discussed in Part VII.A.2.

2. Parol Evidence: Articles 11 & 29

The parol evidence rule bars evidence of an earlier oral contract that contradicts or varies the terms
of a subsequent or contemporaneous written contract. Parol evidence issues may arise under the
CISG in two contexts: first, whether parol evidence may be used to prove the existence or scope of
a contract, pursuant to Article 11; second, under what circumstances parol evidence may be used
regarding the modification or termination of a contract under Article 29.

a. Admissibility of Parol Evidence

Cases involving the application of the parol evidence rule to the CISG have been limited to United
States' courts.[135] The United States instituted a statute of frauds and parol evidence rule in
Section 2-201 of the Uniform Commercial Code.[136] Consequently, parties bringing cases in
the United States have raised the parol evidence rule, attempting to exclude evidence that a contract
existed or evidence of unfavorable contract terms. The majority of U.S. courts have resisted the
temptation of homeward trend in barring the application of the parol evidence rule to contract
disputes governed by the CISG.[137] Article 11 clearly recognizes the validity of oral [page 328]
contracts, which logically would allow parol evidence to prove that a contract has been agreed to by
the parties and what the agreement included. Moreover, courts have interpreted Article 8(3) of the
CISG which directs courts to give "due consideration ... to all relevant circumstances of the case
including the negotiations..." to determine the intent of the parties as a clear instruction to admit
parol evidence even in cases where there is a formal written contract.[138] The stronger
argument, then, is that given the existence of the provisions in Articles 11 and 8(3), the admissibility
of evidence in a contract dispute is within the scope of the CISG. Furthermore, application of nation-specific rules like the American parol evidence rule is antithetical to CISG's general principles of
uniformity and international character.[139]

b. Types of Extrinsic Evidence

The CISG allows a broad spectrum of admissible evidence for construing the terms of the parties'
agreement.[140] Using Articles 8 and 9 as gap fillers, U.S. courts have complied with the CISG's
mandate to admit a broad range of extrinsic evidence in proving the existence of a contract or the
content of contracts. In cases involving both written and oral agreements, the CISG allows a court
to consider not only the written agreement, but also statements made prior to the agreement and
statements that contradict the written documentation.[141] Regardless of whether the [page 329]
original agreement was in writing, the CISG allows a court to admit all information relevant to the
formation of the contract.[142] In a case where the parties disagreed on the terms of the
contract, one U.S. court noted that evidence could include "any negotiations, agreements, or
statements made prior to the issuance of the invoices in issue" as well as any prior course of dealings.
[143]

The permissiveness of the CISG evidence regime is apparent in cases where courts have admitted not
only evidence pertaining to negotiations, and agreements or statements made prior to a written
agreement, but also evidence of the parties' subjective intent.[144] The court in MCC Marble
Ceramic Center, Inc.[145] stated that "the CISG appears to permit a substantial inquiry into the
parties' subjective intent, even if the parties did not engage in any objectively ascertainable means of
registering this intent."[146] The court held that it had to consider evidence of the parties'
subjective intent that certain terms of a written agreement were not binding.[147] The plaintiff
had argued that the defendant was aware of the plaintiff's subjective intent not to be bound by the
terms on the reverse side of the pre-printed form, despite a provision directly below the signature line
that expressly and specifically incorporated those terms.[148] This case illustrates the difference
in approach between the UCC and the CISG evidence regimes. While parol evidence is generally
admissible under the UCC only to resolve patent ambiguities, the CISG allows evidence of the parties'
subjective intent, even when there is no ambiguity in the written contract or reasonable dispute as to
an applicable trade usage.[149][page 330]

The lack of knowledge of the inner workings of the CISG in areas such as subjective intent and the
use of extrinsic evidence was apparent in GPL Treatment v. Louisiana-Pacific Corp.[150]
CISG's applicability as the appropriate law was an issue in the case. Applying the UCC, the Oregon
Court of Appeals found that an oral agreement followed by a written confirmation was valid due to
the UCC's "merchant exception" to the statute of frauds. The merchant exception states that when
one merchant receives a written confirmation of an oral contract from another merchant "sufficient
against the sender," the contract becomes enforceable unless the recipient objects within 10 days.
[151] The dissenting judge disagreed with the sufficiency finding but correctly maintained that
the CISG should have applied and that under Article 11 the oral agreement itself would have been
valid, thereby eliminating the need for the court to analyze the sufficiency of the written confirmation.
[152]

c. Contract Modification

Article 29 allows contracts to be modified or terminated by the "mere agreement" of the parties. This
provision reinforces the principle that no particular form is required for either modification or
termination.[153] Oral terminations or modifications, however, are ineffective if the parties have
previously prescribed formalities to such acts. National courts will find modifications to be invalid
in at least three situations. First, when the modification does not represent "agreement" by the
parties. Second, when [page 331] a writing is required because one of the parties has its place of
business in a Contracting State that made a declaration pursuant to Articles 12 and 96. In such a
situation Article 29 prohibits oral modifications.[154] Third, when the parties include a no oral
modification clause in a written contract.

Just as intent is critical in determining the existence or scope of a contract under Article 11, so intent
is important in examining the validity of a modification. Whether or not the parties have agreed on
the modification is a question that incorporates the offer and acceptance rules under Articles 14, 18,
and 19, as well as interpretation rules under Articles 8 and 9. A U.S. court in Chateau des Charmes
Wines Ltd. v. Sabate USA Inc. found that one party's unilateral attempt to modify an agreement failed
where there was no indication that the other party accepted or agreed to the new terms.[155] The
parties had orally agreed to the essential terms of the contract, but a forum selection clause which was
not part of the original agreement, was included in subsequent invoices.[156] According to the
court, it would be illogical to make the forum selection clause contained in the invoices part of the
contract.[157] The court stated that "[n]othing in the Convention suggests that the failure to
object to a party's unilateral attempt to alter materially the terms of an otherwise valid agreement is
an 'agreement' within the terms of Article 29."[158] The court took into account the various
circumstances recommended in Article 8(3) to determine the parties' intent, but concluded that there
was no evidence or conduct that indicated the party had agreed to the modifications added to the
invoice.[159] Other courts have also insisted on evidence of an agreement. For example, a
French court considered affidavits from the buyers' witnesses who were present at a meeting to
determine whether the parties had concluded a valid price modification.[160][page 332] Because
the affidavits did not mention the seller's agreement to the price, however, the court held that "the
modification of a sale price cannot result from the general environment of a meeting."[161]

Parties may avoid parol evidence difficulties such as those raised in the previous section by inserting
a merger or no oral modification clause that "extinguishes any and all prior agreements and
understandings not expressed in the writing."[162] Enforcing such clauses preserves the intent
of the parties as well as the Convention's principle of freedom of contract. The exception to Article
29's general rule, however, is that a "party may be precluded by his conduct from asserting such a
provision to the extent that the other party has relied on that conduct."[163] Several decisions
indicate that national courts respect clauses that prohibit oral modifications or the use of extrinsic
evidence, where there is no evidence that one party acted in a manner to induce reliance on oral
modifications.[164] Nevertheless, where a no oral modification or merger clause exists, a party
is allowed to establish conduct, such as a course of dealing, to override the modification clause.
[165] Despite academic concerns about the difficulty of interpreting Article 29(2), cases
addressing the issue have yet to surface.[166]

Article 29 allows contracts to be modified or terminated by the "mere agreement" of the parties. The
Secretariat's Commentary indicates that this [page 333] provision overcomes the common law
requirement of consideration.[167] At least one U.S. court as well as the Court of Arbitration
of the International Chamber of Commerce have recognized that under the CISG, a contract for the
sale of goods may be modified without consideration.[168] In one recent U.S. decision, however,
the court approached the consideration issue as a question of contract validity, which Article 4 of the
CISG specifically states is not governed by the Convention.[169] This is a questionable extension
of the validity delegation under Article 4. Article 29 brings contract modification within the scope
of the CISG. The specific default rules of Article 29, namely no writing or consideration
requirements, preempts the more general charge that issues of validity are to be determined by
national law.

B. Offer and Acceptance Rules - Articles 14-24

Despite its general informality and incorporation of flexible, open-ended rules, the CISG provides
specific rules of offer and acceptance to determine whether a valid contract has been concluded. The
rules of offer and acceptance, concerning the necessary content, timing, and revocation of offers, are
contained in Articles 14 through 24. A valid offer must "be addressed to one or more specific
persons," be "sufficiently definite," and indicate the offeror's intention "to be bound in case of
acceptance."[170] If the offer is not addressed to "one or more specific persons, it is merely an
invitation to offer, unless the contrary is clearly indicated by the person making the proposal.[171]
Identification of the goods, quantity, and price are [page 334] the essential elements that determine whether
the offer fulfills the "sufficiently definite" requirement.[172] An offer does not fail for lack of
definiteness, however, if these terms are not expressly fixed. Article 14(1) allows such terms to be
"implicitly" fixed or provided for in some other way.

There are numerous, highly specific rules that control the effectiveness of offers and revocation of
offers. An offer becomes effective when it reaches the offeree.[173] Article 24 interprets
"reaches" to mean that the offer has been communicated orally, delivered personally, or delivered to
the offeree's place of business, mailing address, or habitual residence.[174] If the offer is revoked
before it reaches the offeree, it becomes ineffective even if the offer stated that it was irrevocable.
[175] If a revocation reaches the offeree at the same time as the offer, the offer does not become
effective.[176] Finally, an offeree cannot accept an offer until it is received even if he has
knowledge of it.[177]

If a revocation reaches the offeree before the dispatch of the acceptance, the revocation is effective.
[178] An important exception to the right to revoke prior to acceptance is the CISG's expanded
version of the common law's firm offer rule. Unlike, the Uniform Commercial Code's ("UCC") firm
offer rule,[179] a firm offer under the CISG need not fix a time or make an assurance of
irrevocability. If an offer does not state a specific period of time for acceptance, the question may
still arise whether the offer indicates it is irrevocable or whether the offeree had reasonably relied on
the offer being held open.[180]

The CISG's acceptance and rejection of offer rules are as specified by the offer rules. If an
acceptance is withdrawn before it is received, no expectations have been created and the acceptance
is not effective upon receipt.[181] An offer, even if it is irrevocable, is terminated when a
rejection reaches the offeror.[182] Article 17 may be linked to Article 19 when the [page 335]
rejection is ambiguous, since it may be interpreted as a counter-offer (rejection) or as an acceptance.
If a reply is a rejection under Article 17, then a court need not get into the more complicated issues
raised by Article 19, because no contract is concluded.

Article 18 specifies the criteria, time and manner for a valid acceptance. Determining if and when
there has been a valid acceptance is crucial because a contract "is concluded at the moment when an
acceptance of an offer becomes effective ... ."[183] Either statements or conduct may constitute
a valid acceptance. "Silence or inactivity does not in itself amount to acceptance," so that the
recipient may ignore an offer, even if that offer states that it will assume acceptance if there is no
reply.[184] The "in itself" qualification to this provision leaves open the possibility that in some
cases silence or inactivity may amount to acceptance. How assent is indicated is left open but it must
be communicated. Just as an offer is not valid until it reaches the offeree, an acceptance is not valid
until it reaches the offeror.[185] Furthermore, the acceptance must reach the offeror within the
stated period of time or, if no time is fixed, within a reasonable period of time.[186] Performance
of an act may also constitute acceptance if it is accepted usage or practice between the parties.
[187]

Article 20 provides rules for calculating the time for acceptance "fixed" in the offer. If a period of
time rather than a precise date is given, by which the offeror must respond, Article 20 specifies that
the time for acceptance begins to run from the time of dispatch in the case of a telegram, from the
date given on a letter, or if none is given, by the date on the envelope.[188] If the communication
is instantaneous, the time begins to run immediately.[189] Official holidays and non-business days
are calculated in the time period, unless the offer cannot be delivered on the last day of the period,
in which case "the period is extended until the first business day that follows."[190]

Article 21 addresses issues of late acceptance. In general, an offer must be accepted before it expires.
However, the offeror may elect to "accept" a late acceptance by informing the offeree of his
acceptance.[191] This rule, in essence, converts, the acceptance into an offer giving the [page
336] original offeror a power of acceptance. A late acceptance is distinguished from a late arrival.
The late arrival occurs when some unforeseen delay in transmission occurs through no fault of the
offeree. The late arrival will be effective as an acceptance, unless the offeror, without delay,
otherwise informs the offeree.[192]

1. Offer Rules and the Open Price Term: Articles 14 & 55

Cases interpreting Article 14 appear to rely mostly on the language of the CISG, with a modest
amount of cross-references to other provisions in the Convention. Article 14's requirement that a
valid offer be addressed to one or more specific persons has spurred academic debate, but it has not
surfaced in a meaningful way in litigation.[193] Two areas of contract dispute that have been
analyzed in the courts are offeror's intent to be bound upon acceptance of the alleged offer and
contract requirements regarding the specificity of quantity and price. Consequently, reference to
Article 8's methodology for interpreting intent is a vital component in determining whether a term is
sufficiently definite under Article 14.[194]

The essential terms of the contract -- identification of the goods, quantity, and price -- must be specified;
there are many methods of determining what the terms are if they are not stated expressly.[195]
The degree that an offer fails to specify a sufficiently definite price is the issue that has created the
most discussion under Article 14. Article 14's rule that the price may be implicitly fixed was a
compromise between countries that [page 337] supported open price offers and those that opposed
such offers.[196] Article 55, on supplying "the price generally charged," has served as a gap filler
in determining whether an offer is "sufficiently definite" as required by Article 14(1). National courts
have shown flexibility in finding that a price is sufficiently definite if it can be fixed or determinable
in some way, such as a reference to market prices.[197]

National courts have used other CISG articles to fill in missing price and quantity terms. Article 8
determination of intent based upon a totality of the circumstances analysis[198] (prior dealings,
course of performance, usage), as well as Article 9 (usage, prior dealings), which addresses industry
practices and prior dealings between the parties, supplement Article 14 in determining whether the
parties intended to be bound and whether the terms of the agreement are sufficiently definite in light
of that intent. For example, national courts have held that price and quantity may be impliedly fixed
by a long time commercial relationship between the parties.[199] Similarly, the ICC Court of
Arbitration found that a contract was sufficiently definite even though the price agreed on by the
parties was provisional and subject to revision depending on the price obtained from the final buyer.
[200] The court's finding relied on Article 9(2) which assumes that [page 338] parties apply
customary trade usage, as well as Article 8(3) which allows all relevant circumstances of the case,
including negotiations, usages and practices, to be taken into account in determining the parties'
intent.[201] The tendency of national courts to respect industry practice and custom is also
reflected in a case where the plaintiff claimed that well-established industry custom was to rely on
unwritten supply commitments. Noting that the CISG has "a strong preference for enforcing
obligations and representations customarily relied upon by others in the industry," the U.S. court in
Geneva Pharmaceutical Tech. Corp. v. Barr Labs., Inc.[202] held that a purchase order for
"commercial quantities" of a product was sufficiently definite under Article 14 since it was supported
by evidence of industry custom.[203]

Article 8(2)'s emphasis on the "reasonable person" interpretation of statements and conduct and
Article 8(3)'s inclusion of subsequent conduct to determine intent have also been used by national
courts to determine whether parties intended to be bound according to Article 14. Article 8(2)
instructs that statements and conduct of a party "are to be interpreted according to the understanding
that a reasonable person of the same kind as the other party would have had in the same
circumstances."[204] A German court found that a contract for three "truck loads" of eggs was
sufficiently definite, based on Article 8(2)'s interpretation of intent, because a reasonable buyer would
expect a quantity equivalent to the full load capacity of the trucks.[205] A Hungarian court,
although not referencing Article 8, held that the goods were unambiguously identified, and the
quantity and price sufficiently definite, even where the offer "allowed unilateral power to the buyer"
in choosing the quantity and model types of the products being purchased.[206] Relying on
Article 8(2) and 8(3), an Austrian court found that a contract for a "certain quantity" of chinchilla
[page 339] furs was sufficiently definite as evidenced by the buyer's subsequent conduct of
immediately selling the furs delivered.[207] Similarly, a Swiss court, found that when the buyer
of fashion textiles requested the seller to send an invoice to the embroiderer of the textiles, this
conduct subsequent to the delivery of the goods indicated the buyer's intent to be bound as to the
quantity of goods delivered.[208]

When an offeror claims that he intended to be bound, courts evaluating the validity of the offer must
also consider whether the other party was reasonably aware of such intent. A German court held that
a seller's fax offering to sell yarn did not communicate the requisite intent to be bound because the
fax referred to instructions from its parent company.[209] The court found that the
communication did not clearly identify who the seller was, as the purported offeror referred to itself
as "exporter" not "seller."[210]

There are two issues arising from Article 55 that national courts have addressed in their opinions.
These issues are whether the failure of the parties to state a price prevents contract formation and the
enumeration of the factors utilized to determine the "price generally charged at the time of the
conclusion of the contract for such goods sold under comparable circumstances in the trade
concerned."[211] As to the initial issue of contract formation, two divergent views have
developed regarding the price requirement, one restrictive and the other liberal. Professor Farnsworth
maintains that some method of determining the price must be included in the offer for a valid contract
to be concluded. This restrictive view is consistent with established contract law in many states that
require the setting of a specific price in order for an enforceable contract to be formed. Under this
view, Article 55 would only be used to set a price after an enforceable contract had been determined
to exist. [212]

The alternative view argues that the restrictive interpretation of the CISG's provisions with respect
to contract formation that requires the existence of a definite or determinable price conflicts with the
very existence of Article 55.[213] A more liberal view has been advocated by [page 340]
Professor Honnold who maintains that Article 55 allows "the price generally charged at the time of
the conclusion of the contract" to cure the lack of a price or a method for determining the price.
[214] Professor Honnold insists that as long as the parties' intention to contract is clear, the
construction of the Convention allows the parties to vary the effect of any of the Convention's
provisions, including Article 14's price provision.[215]

Professor Honnold's view is supported by the Secretariat's Commentary to Article 14 which states
that as long as there is intent to be bound, the law of sales can supply missing terms.[216] Several
national courts have also favored Professor Honnold's view. A Swiss court in C. v. W.,
Bezirksgericht St. Gallen used Article 55 to interpret the price stated in a seller's corrected invoice
to be the price generally charged under comparable circumstances in the trade.[217] The
indefiniteness of the price term was apparently not fatal because the court was convinced that the
parties had manifested their intent to be bound.[218] In a dispute concerning the sale of chinchilla
pelts by a German seller to an Austrian buyer, the Austrian Supreme Court concluded that the
agreement of the parties setting a price range for the pelts depending upon quality did not defeat the
formation of a contract.[219] In reaching this conclusion, the court held that pursuant to Article
55 if the parties' agreement failed to explicitly or implicitly establish a specific price, then the court
could imply an agreement based upon the "usual market price."[220] The court specifically [page
341] noted that the parties did not object to the price of fifty German marks per pelt established by
the court of first instance in its initial review of the case.[221] As such, the court concluded that
the price was sufficiently definite as to constitute a contract and make the application of Article 55
unnecessary.[222] By contrast, the Russian Tribunal of International Commercial Arbitration
rejected the gap-filling role of Article 55 where the parties agreed to fix a price "ten days prior to the
beginning of the new year" and were unable to do so.[223] The subsequent failure of the parties
to reach an agreement with respect to price went to the heart of the transaction and specifically
defeated the formation of a contract.[224]

The second issue addressed by national courts with respect to Article 55 is the enumeration of the factors utilized to determine "the price generally charged at the time of the conclusion of the contract
for such goods sold under comparable circumstances in the trade concerned."[225] Initially, at
least one national court has concluded that the reference to market price in Article 55 is overridden
by a contrary agreement of the parties as determined by application of the CISG in its entirety.
[226] Based upon this opinion, the parties are free to list any number of factors that may be
utilized to establish the price. Included on the list of acceptable factors are the price range established
by the parties with respect to the goods at issue and individual pricing guidelines dependent upon the
quality of the goods.[227] An additional relevant factor is the absence of objection by the buyer
within a "short time period" to the price set forth in invoices delivered by the seller.[228] In such
a case, national courts assume the buyer's agreement that the price stated in the seller's invoice is the
price generally charged under comparable circumstances in the trade concerned according to Article
55.[229][page 342]

2. Firm Offers: Articles 15-17 and 20-24

Articles 15 and 17, along with Articles 20 through 24, have not been the subject of judicial attention.
Article 16, however, has been subject to judicial and arbitral interpretations.[230] In Geneva Pharmaceuticals Technology Corp. v. Barr Laboratories, Inc.,[231] the court addressed the
question of promissory estoppel under the CISG. Article 16(2)(b) provides that an offer is
irrevocable "if it was reasonable for the offeree to rely on the offer as being irrevocable and the
offeree has acted in reliance on the offer."[232] The U.S. court recognized this provision as a
"modified version of promissory estoppel that does not require foreseeability or detriment."[233]
More importantly, it stated that other promissory estoppel claims outside the area of firm offers could
be preempted by the CISG because "to apply an American or other version of promissory estoppel
that does require [foreseeability or detriment] would contradict the CISG and stymie its goal of
uniformity."[234] This is an express statement by a U.S. court against the urge toward homeward
trend approaches to CISG interpretation.[235]

3. Rules of Acceptance: Article 18

Because Article 23 states that "a contract is concluded at the moment when an acceptance of an offer
becomes effective in accordance with the provisions of this Convention," ascertaining whether an
offer has been accepted according to Article 18 is critical in determining the parties' contract rights
and remedies. Professor Honnold emphasizes the theme of open communication that runs through
Article 18.[236] Difficult issues of communication arise most frequently in cases involving when
silence or inactivity may be a valid method of acceptance, when commercial letters of confirmation
indicate assent, and whether standard terms included in the offer and acceptance have been fairly
communicated so as to become part of the contract. [page 343]

Article 18(1) states that silence, by itself, does not constitute acceptance. However, it makes clear
that silence or inactivity linked with other circumstances may be enough to indicate assent. If the
parties have a practice of accepting without notice, if industry usage has developed, or if other
circumstances indicate that silence is reasonable, silence or inactivity may be a valid method of
acceptance.

National courts have concluded that silence indicated acceptance when silence qua acceptance was
reasonable under the circumstances. When a seller offered to terminate a contract after receiving
notice of non-conformity and announced that he would resell the goods himself, the buyer's silence
and failure to seek remedy for breach was an implied acceptance, according to a German court.
[237] While the court recognized that silence or inactivity alone is not enough for acceptance
under Article 18(1), it concluded that "together with other circumstances ... silence can indeed be
important and may be interpreted as the acceptance of an offer of cancellation."[238] A French
court also found that silence operated as acceptance when a buyer accepted goods without
reservation.[239] The buyer subsequently sought to reject the goods, claiming that his silence
about the condition of the goods did not indicate acceptance, but the court found that the
non-conformity claimed by the buyer was obvious to an expert such as the buyer who had specified
the modifications in the goods.[240]

Silence may also be acceptance where the parties have an established pattern or practice in their
dealings. If a seller has an established practice of filling orders without expressly accepting them, then
the buyer has a right to expect that its orders will be filled.[241] In the French case of Sté
Calzados Magnanni v. Sarl Shoes General Int'l, the seller maintained that it had never received the
orders. The French court was unconvinced and found acceptance of the orders by silence based on
the practices established between the parties.[242] The circumstances that indicated acceptance
by silence also included the seller's awareness of the buyer's intention to enter the footwear market.
[243] A U.S. court also found that silence was acceptance when a seller did not object to an
arbitration clause in a contract for a period [page 344] of five months. The court held that the prior
practices of the parties placed a duty on the seller to alert the buyer of its objection to the
incorporation of the clause.[244] The court supported its conclusion by citing Articles 18(1) and
18(3) of the CISG, the Restatement (Second) of Contracts, and several cases from its jurisdiction.
[245]

Commercial letters of confirmation raise special issues regarding acceptance by silence.[246] In
some national legal systems, most notably Germany, silence upon receipt of a commercial letter of
confirmation indicates acceptance.[247] According to Professor Schlechtriem, the German rule
which allows unanswered letters of confirmation to become part of the contract was expressly
rejected at the Vienna Convention.[248] Consequently, Professor Schlechtriem maintains that
letters of confirmation that modify or add to a contract are ineffective under the CISG, unless the
sending of such letters amounts to a usage under Article 9(2).[249]

National courts have differed in how they interpret the trade usage provision regarding commercial
letters of confirmation. A Swiss court found that the buyer's failure to respond to a letter of
confirmation from the Austrian seller constituted acceptance according to trade usage.[250] The
court stated that both parties knew or ought to have known that under both Swiss and Austrian law,
silence or inactivity can be regarded as an acceptance when there is no reply to a commercial letter
of confirmation.[251] Professor Schlechtriem criticized this ruling on two counts. First, the court
misstated the law of Austria, where the purported rule had been rejected. Second, "the usage must
apply to the parties in the particular trade, and must be observed by them," for the exception to
Article 18(1) to apply.[252]

A Swiss court also found that the sender was entitled to regard silence as acceptance to a letter of
confirmation even where the letter modified [page 345] payment terms.[253] The court stated
that good faith is the key to determining whether a sender may assume the recipient of the
confirmation letter intended to consent to the terms of the letter.[254] Although the court did
not discuss prior practices or usage in this case, the recipient's conduct, accepting the first check that
was attached to the letter of confirmation, was sufficient to support a conclusion that the recipient
intended to be bound by the terms of the confirmation letter.[255]

Two German cases reiterated the more conservative view that trade usage must be international in
order for it to be implied into a contract. In one case, the court distinguished the use of letters of
confirmation in a national context from the international context.[256] A French buyer and a
German seller had concluded an oral contract regarding the price of chocolates. When the buyer was
silent as to the different terms in the seller's letter of confirmation, the court held that the terms of the
confirmation letter were not part of the contract as such letters could not be considered part of
international trade usage as required by Article 9(2). The court concluded that although the practice
was well recognized in Germany, it was not so recognized in France.[257] A German court held
that a buyer seeking to hold a seller to the modified price contained in a letter of confirmation did not
establish that there was a usage known in international trade recognizing silence as acceptance to a
commercial letter of confirmation.[258]

When a party seeks to incorporate standard terms into an offer or [page 346] acceptance, courts
consider whether such terms have been fairly communicated to the other party. While the CISG does
not specifically address the incorporation of standard terms, national courts generally agree that its
provisions on contract formation and interpretation determine whether standard terms have been
validly incorporated into the contract. An alternative view is that Article 4 makes it clear that the
validity of standard terms is beyond the scope of the Convention, so that validity issues are
determined by domestic law.[259] Civil law legal systems have emphasized that a party must be
reasonably aware of the terms the other seeks to incorporate but how much information about
standard terms must be communicated is less clear from the decisions.

In general, a party that wishes to incorporate standard terms must show good faith efforts to
communicate those terms to the other party. Failure to provide standard terms in the other party's
language, failure to note that standard terms are listed on the back of a form, and failure to provide
the text of standard terms have lead courts to exclude such terms from the contract. In ISEA
Industrie S.p.A. v. Compagnie d'Assurances,[260] a French court held that where the buyer's
standard terms were printed on the back of a form and the seller had signed only the front page, the
standard terms were not part of the contract. The court held that the terms of the contract had
already been determined and the seller's attempt to impose additional terms was ineffective. A
German court, however, held that where standard terms were printed on the back of the order form
in both parties' languages and the front side of the order form specifically referred to the standard
terms, the terms were validly incorporated into the contract.[261] Likewise, where an offer made
reference in bold letters to particular industry standards and the seller made repeated reference to
such standard throughout negotiations, the buyer was aware or should have been aware that the
general conditions were part of the agreement, according to Articles 8(1) and (3).[262][page
347]

The Federal Supreme Court of Germany addressed the issue of the type of information needed to
prove intent to standard or general terms.[263] Using Articles 14 and 18, supplemented by Article
8's rules on interpretation, the court held that the seller's "Sales and Delivery Terms," which included
a notice of warranty exclusion, were not part of the parties' contract. Although the contract referred
to such terms, a copy of the seller's Sales and Delivery Terms was never transmitted to the buyer.
The court held that "the user of general terms and conditions is required to transmit the text to the
other party or make it available in another way."[264] According to the court, the burden to
provide the terms was on the party wishing to insert such clauses.[265] The court emphasized
the fact that parties to an international contract should not be expected to know the particular terms
and conditions that might be familiar to parties that share the same national legal system and business
customs.[266] Requiring one party to make general terms and conditions available to the other
party, would, according to the court, promote the CISG's goals of good faith and uniformity.
[267] Similarly, an Austrian court held that a seller's attempt to incorporate standard terms
requiring a contract to be in writing was not valid.[268] Although the seller had proposed such
terms as part of a master contract prior to a subsequent sales contract, the master contract was never
concluded, so that reference to terms in that agreement could not be binding on the buyer in the
subsequent contract.[269] The court recognized that contractual negotiations, prior practices and
trade usages may provide evidence that the offeree was aware of the inclusion of standard terms.
This transaction was the parties' first together, however, and the court found that [page 348] the
offeree had no reason to be aware that the general terms were to be included in this deal.[270]

C. Battle of the Forms

Article 19 raises the difficult issue of an acceptance with modification or the exchange of forms
containing additional or conflicting terms. Negotiated terms, essential to the contract, may appear
on the front of a form while additional terms and general conditions appear on the reverse side.
Buyers' and sellers' forms undoubtedly contain provisions that favor their respective positions. The
boilerplate terms are routinely ignored until a dispute arises. Forms are exchanged in what one author
termed "une conversation des sourds" (a conversation of the deaf).[271] Two questions arise
when there is dispute. First, was a valid contract formed despite the existence of conflicting, non-dickered terms? Second, if a valid contract was concluded, what are the terms of the contract?
Article 19(1) provides that an offer that "contains additions, limitations or other modifications is a
rejection of the offer and constitutes a counter-offer."[272] If the additional terms do not
materially alter the offer, however, a valid contract is formed and the additional terms enter the
contract unless the receiving party promptly objects to their inclusion.[273] This provision
prevents a party from escaping from contractual obligations for immaterial differences between the
offer and acceptance.

Article 19(3) sets a broad materiality standard by listing "price, payment, quality and quantity of the
goods, place and time of delivery, extent of one party's liability to the other or the settlement of
disputes" as terms that would materially alter the offer.[274] The breadth of these categories of
material terms is susceptible to even further extension by the open-endedness of the introductory
phase "among other things."[275] Article 19 is essentially an adoption of the now-discarded
common law mirror image rule with the exception that minor differences do not defeat an otherwise
valid acceptance. The breadth of Article 19(3) severely limits the scope of the minor term. [page
349]

A battle of the forms arises when parties exchange forms that have inconsistent terms. One
commentator explained that the CISG has not been able to "create a consistent pattern that satisfies
our basic sense of fairness and justice," with regard to the battle of forms.[276] Although some
theorists maintain that the CISG in general and Article 19 in particular do not apply to the battle of
the forms, many national courts apply Article 19 in interpreting and resolving such conflicts, using
the rules of offer and acceptance.[277] The drafters considered various methods of treating the
exchange of inconsistent forms. Under the common law, the offer and acceptance have to match
exactly or create a mirror image to conclude a valid contract. UCC's § 2-207 tried to rectify injustices
that occurred when one party failed to perform under a contract because of some minor discrepancies
between the terms in the exchanged forms. Under § 2-207, a written acceptance or a written
confirmation is valid "even though it states terms additional to or different from those offered or
agreed upon, unless acceptance is expressly made conditional on assent to the additional terms."
[278] Article 19 of the CISG adopts the mirror image rule due to its broad definition of
materiality in Articles 19(3).

In considering the battle of the forms dilemma, Professor Schlechtriem states that "the different
situations of collision" and the "various possible behaviors of the parties" make it difficult to find "a
single formula" that addresses this difficult issue.[279] Courts seem willing to find a valid
contract where there is an exchange of forms and a general intent to enter into a binding agreement.
The more difficult issue to predict is the courts' determinations of what terms enter into the contract.
[280] Three solutions to the issue of conflicting terms in battle of the forms scenario have been
offered. First, the effect of conflicting terms in the battle of the forms scenario is not governed by
the CISG. In short, the effect of conflicting terms on contract formation is a validity issue that Article
4 delegates to national law. Second, the existence of conflicting terms creates a gap that the court
can fill by recourse to Article 7(1)'s principle of good faith [page 350] ("knock out rule"). A third
solution that has been offered is that the terms provided in the acceptance controls (the "second shot
rule").[281] The logic is that the offeror has an implied duty to object to the additional or
conflicting terms. Failing to object to additional or conflicting terms and then proceeding to perform
on the contract results in a finding of an implied consent to the terms of the acceptance.

Under the knock out rule, if the essential terms of the contract -- identification of the goods, quantity,
quality, and price -- are agreed upon and the parties have commenced performance,[282] then the
court will find there was a valid contract and ignore the conflicting terms.[283] Even though the
conflicting terms in such cases could be considered material under Article 19(3), courts prefer to
dismiss the conflicting terms rather than find that no contract was concluded. Unless there is clear
evidence that at least one of the parties did not want to contract without the inclusion of the particular
provision in dispute, then "the intent to enter a contract on the part of both parties trumps the Article
19 argument for invalidity."[284] This approach seems to uphold the intentions of the parties
because in these cases the parties usually have at least partially performed.

Two cases decided by the German courts applied the knock out rule. In a case involving the sale of
knitwear by an Italian seller to a German buyer, the parties had agreed on the essential terms of the
contract and had performed.[285] When a dispute arose about whether the goods conformed to
[page 351] the contract, the parties disagreed on whether certain general terms were part of the
contract. The German buyer had included in its general terms a forum selection clause that was
additional to the terms in the seller's form. Under Article 19, it could be argued that no contract was
formed because the forum selection clause was a material alteration to the offer. Article 19(3)
identifies differing terms regarding "the settlement of disputes" as material.[286] Because the
parties had performed based on the essential terms of the agreement, the court found that there was
a valid contract and that the parties had either "waived their claim to the application of their
respective standard business terms or derogated from Article 19 in exercise of their party autonomy
under Article 6."[287] The court held that neither party's general conditions became part of the
contract.[288]

The Federal Supreme Court of Germany confirmed the knock out rule approach to cases where the
parties have agreed on the essential terms of the contract for the sale and have performed.[289]
Professor Schlechtriem has asserted that the German Supreme Court's message was that "[c]onflicting
standard forms [terms] are entirely invalid and are replaced by CISG provisions, while the contract
as such remains valid."[290] In that case, a dispute arose when customers of a buyer complained
that the powdered milk delivered by the seller had a sour taste. The standard terms exchanged by the
parties contained conflicting terms regarding the extent of the seller's liability. The court found that
the contradiction in terms "did not prevent the existence of the sales contracts because the parties did
not view this contradiction as an obstacle to the execution of the contracts."[291][page 352] The
seller argued that the CISG was derogated by a clause in its standard forms and that under the
applicable German Civil Code, no damages could be claimed. In concluding that neither the buyer's
nor the seller's standard forms were included in the contractual arrangement, the court refused to
single out some clauses which might be beneficial to one side or the other.

The Cour de Cassation in France also applied the knock out rule regarding conflicting jurisdiction
clauses.[292] Recognizing that jurisdiction provisions are material terms according to Article
19(3), the court, instead of invalidating the contract, applied traditional conflict of law rules to
determine jurisdiction.[293] A U.S. court addressing a similar issue, found that a forum selection
clause was not part of a contract because UCC 2-207 requires "express consent of the parties."
[294] Without explanation, the court stated that the "same conclusion" would be reached under
the CISG.[295]

Some national courts have used the last shot doctrine to resolve cases involving the battle of the
forms. According to this approach, courts interpret an action or performance by one of the parties
as an indication of assent to additional terms. The last shot doctrine can be seen as evolving from
rules of offer and acceptance, with each new offer being a counter-offer [page 353] until the last one
is accepted when one party indicates assent by performance or other conduct.[296] Therefore,
if a party fails to object to an additional or modified term, performs, or partially performs, then he has
accepted the additional or modified term. Whereas the knock out rule would ignore conflicting terms,
the last shot approach incorporates the terms of last communication. Some commentators maintain
that the last shot rule is out of touch with commercial reality and encourages parties to act in bad faith
by producing numerous forms with standard terms in hopes of controlling the contract through the
last shot.[297] Others consider the last shot rule to be the best approach to a difficult situation
because it provides "certainty and legal security."[298]

A German court held that an 8-day notice of defects provision in a confirmation letter was
enforceable at the time the buyer took delivery of the goods.[299] The notification terms
contained in the seller's confirmation letter were additional material terms that amounted to a counter-offer under Article [19(1)], but the court found that the buyer accepted those terms by accepting
delivery.[300] Another German court found that a buyer of cashmere sweaters accepted the
seller's additional terms which incorporated the "Standard Conditions of the German Textile Industry"
by performing under the contract.[301] The court merely cited Articles 18 and 19 without
comment.[302] Similarly, another German court held that acceptance of delivery indicated assent
to a material modification. When the buyer claimed to have ordered a certain quantity of shoes and
the seller delivered a different quantity, the court interpreted the delivery of a different quantity as a
material alteration under Article 19(3). The court held, however, that the delivery was a counter-offer which the buyer accepted by taking the goods.[303] In contrast, a U.S. court in Claudia
v. Olivieri Footwear Ltd.[304][page 354] held that even though the goods had been delivered,
it could not hold as a matter of law that a valid contract had been concluded when the parties
disagreed on a delivery term subsequent to an oral agreement.[305] The court considered the
parties' prior course of dealings, which included thirteen transactions, but found insufficient evidence
to conclude that they had always used the same delivery term.[306]

If a party continues to perform, or fails to object in a timely manner, to additional terms, she runs the
risk that her conduct, silence, or act of performance will be interpreted by a court as an acceptance
of the disputed term.[307] This was the issue in Filanto v. Chilewich,[308] where the court
found that a manufacturer accepted an arbitration provision as part of the agreement, because he
failed to object in a timely manner and commenced performance by opening a letter of credit. This
was despite the fact that it repeatedly objected during negotiations to the incorporation of an
arbitration clause and that such a clause is a material term under Article 19(3). In Magellan Int'l
Corp. v. Salzgitter Handel GmbH, the court found that a contract was formed when a distributor
indicated assent by opening a letter of credit.[309] The court held that the terms of the contract
were those agreed on at the time the letter of credit was opened.

Despite Article 19(2)'s distinction between material and non-material terms in contracts, courts, using
the knock out and last shot rules, have generally disregarded the distinction between material and
non-material terms. The Austrian Supreme Court rationalized the diminishment of the distinction by
arguing that Article 19(3) list of examples of materiality are merely general presumptions that may
be rebutted. The presumption of materiality may be rebutted by evidence including the practices
between the parties, trade usages, conduct during negotiations, and other relevant circumstances.
For example, modifications that are favorable to one party do not require counter-acceptance by the
benefited party.[310][page 355]

The illusiveness of CISG jurisprudence in the interpretation of materiality is evident in a German case
in which the court held that a notice provision which limited the time for rejection of goods was not
a material term.[311] Interpreting the provision in the invoice as a modified acceptance of the
contract, the court held that the notice provision became part of the contract, according to Article
19(2) which puts the burden on the offeree to reject non-material modifications. [312] Since the
buyer did not object, the court found that the provision was valid. Several commentators disagreed
with the decision, arguing that the notice provision was clearly material under the broad language of
Article 19(3).[313]

A French court in Fauba France FDIS GC Electronique v. Fujitsu Microelectronik GmbH[314]
held that a purchase order that altered price and delivery terms did not materially alter the terms of
the offer. On appeal, the Court of Cassation held that a valid contract was formed because the offer
which allowed prices to be modified "according to market increases and decreases" was sufficiently
definite. Unfortunately, both the Court of Appeals and the Court of Cassation failed to discuss the
fact that Article 19(3) specifically declares price and delivery terms as material alterations.[315]

A Hungarian court in Technologies Int'l Inc. Pratt & Whitney Commercial Engine Business v.
Magyar[316] distinguished between the insertion of a material, additional term and "a simple
request" for a material modification. A letter of acceptance contained a provision requesting that the
letter be treated confidentially until the parties made a joint announcement regarding the purchase of
jet engines was a valid acceptance. The plaintiff's offer had a paragraph whereby the defendant
agreed to allow the plaintiff to publish a press release announcing defendant's choice of engine. The
court found that the letter was an unambiguous acceptance, not an amendment, restriction, or other
change that would amount to a rejection under 19(1). [page 356]

It is important to understand the reach of Article 19. It is limited to issues of contract formation and
not to modifications of contract. Thus, it is universally accepted that where a contract has been
validly concluded, one party may not change a material term in the contract without the acceptance
of the other party. The court in Chateau des Charmes Wines Ltd. v. Sabate USA Inc. found that
where an oral agreement did not contain a forum selection clause, one party's attempt to include such
a provision in subsequent invoices did not alter the contract.[317] Because the contract had
already been concluded, any new terms were merely offers which required express assent and did not
create an obligation to reject the term. The court noted that the mere performance of obligations
under the oral contract did not indicate assent to what would be additional material terms under
Article 19(3).[318]

As found in the other areas of contract formation, a review of CISG jurisprudence involving the
battles of the form scenario finds courts struggling to devise a unified framework for applying CISG
rules. Most troubling is that courts seldom use cases from other Contracting States. Because these
battles are so prevalent in international transactions and Article 19 offers the flexibility for courts to
adopt several approaches, Article 19 is one of the areas where the CISG could most benefit from the
adoption of official comments, examples, and guidance that some commentators have suggested.
[319][page 357]

This part focuses on the duties of buyers in the CISG-governed transaction. Given the limited right
of rejection (avoidance) provided to the CISG, the buyer is burdened with numerous duties including
the duty to inspect, give notice of non-conformity, give notice of avoidance, duty to preserve the
goods, duty to pay the price, and duty to take delivery. The following analysis reviews how courts
and arbitral panels have defined the duties enunciated in the CISG. It will also review the buyer's
right to time extensions, along with its associated obligations as provided in Article 47. Finally, this
part will examine the buyer's reciprocal obligations to the seller's right to cure under Article 48.

A. The Duty to Inspect, Give Notice, and Preserve Goods

The CISG requires buyers to inspect goods, and provide adequate and timely notice, with respect to
any defects in the seller's performance and preserve the goods in the event the buyer elects to reject
the seller's tender. These obligations are set forth in Articles 38, 39, 44 and 86. The initial obligation
of all buyers is the duty of inspection. Article 38 provides that the buyer "must examine the goods,
or cause them to be examined, within as short a period as is practicable in the circumstances."
[320] Special rules apply in the event the contract involves the carriage of goods or their
redirection in transit. Examination may be deferred until after the goods arrive at their destination
in the event the contract involves carriage.[321] By contrast, examination of the goods may be
deferred until after their arrival at their ultimate destination in the event they have been redirected in
transit or re-dispatched by the buyer.[322] However, the inspection may be deferred under these
circumstances only if the redirection or re-dispatch occurred without a "reasonable opportunity" for
examination.[323] In addition, the buyer must demonstrate that the seller knew or should have
known of the possibility of such redirection or re-dispatch at the time of the conclusion of the
contract.[324]

The failure to comply with the provisions of Article 38 deprives the buyer of the right to rely upon
the defense of non-conformity of the goods in a future dispute with the seller. The buyer also loses
this defense in the event its notice does not specify "the nature of the lack of conformity within a
reasonable time."[325] The time for providing this notice begins to run from [page 358] the time
of the actual discovery of the non-conformity or from when the buyer should have discovered it.
[326] In any event, the buyer loses the right to rely upon non-conformity of the tendered goods
if it does not give notice to the seller "at the latest within a period of two years from the date on
which the goods were actually handed over to the buyer."[327] This two-year window for notice
is inapplicable to the extent that it is inconsistent with any guarantees set forth in the sales contract.
[328] Furthermore, the buyer retains the right to reduce the price payable to the seller or claim
damages, except for loss of profits, if it has a "reasonable excuse" for its failure to provide the
required notice.[329]

The buyer's ability to reject non-conforming goods is accompanied by a corresponding duty to
preserve such goods for the benefit of the seller. Article 86 provides that the buyer must take steps
to preserve the goods as are "reasonable in the circumstances."[330] The buyer is entitled to
reimbursement from the seller of reasonable expenses incurred in preservation of the goods and is
entitled to retain the goods until its receipt of such payment.[331] In the event the goods have
been placed at its disposal by the seller and are subsequently rejected, the buyer must take possession
on the seller's behalf.[332] The buyer's obligation in this regard is contingent upon its ability to
take possession of the goods without payment of the price and without "unreasonable inconvenience
or ... expense."[333] Buyer's duties under Article 86 are inapplicable in the event the seller or
a person authorized to take control of the goods on its behalf is present at the destination at the time
of the arrival of the goods.[334]

1. Inspection Duties and Rights: Article 38

National courts interpreting the CISG's provisions relating to inspection, notice and preservation of
goods have concentrated on three issues raised by Article 38. These issues are the amount of time
the buyer has to conduct an inspection of the goods, what constitutes an adequate inspection, and the
enforceability of contractual provisions modifying the buyer's inspection rights.

The initial issue addressed by national courts with respect to Article 38 is the time within which the
buyer must inspect goods purchased from their [page 359] vendors. Article 38(1) provides that this
inspection must occur within "as short a period as practicable in the circumstances." [335] This
language does not establish a definite time within which such inspection must occur in order to permit
the buyer to reject the goods on the basis of non-conformity. Rather, it appears that the time within
which such inspection must occur is flexible depending upon the individual circumstances in each
case. Indeed, commentators have noted that "[t]his language seems to acknowledge that the shortest
applicable period to inspect complex machinery received by a buyer in an isolated town of a
developing country may be different from the shortest applicable period to inspect other types of
goods by a sophisticated buyer in a big industrial city."[336]

There is some acknowledgement of the flexibility of this standard in the opinions of national courts.
A U.S. court noted that it was required to take into account the uniqueness of the goods involved,
the method of delivery (including installments) and the familiarity of the buyer's employees with the
goods.[337] Courts adopting this approach have noted that buyers may produce proof
demonstrating why under the specific circumstances inspection could not occur in a diligent fashion.
[338] Although not expressly stated in the CISG, buyers seeking such additional time bear the
burden of proof with respect to the reasons justifying such additional time.[339]

However, this interpretive "flexibility" has not been universally accepted. Rather, the majority of
cases have rejected this approach in favor of less flexibility in the inspection requirement.[340]
These courts have adopted two different approaches to determine whether the buyer's inspection was
within as short a time period as practicable. The first approach requires the buyer to prove a special
burden existed prior to the request for additional time for inspection. These courts have refused to
grant time extensions for inspection of goods, based upon the absence of a burden upon the buyer.
Courts adopting this approach have focused upon the ease with which the inspection could have
occurred at the time of [page 360] delivery [341] or the obviousness of the alleged non-conformity,
such as readily apparent defects and disparities in color and weight.[342] The uniqueness of the
goods, their complicated nature, their delivery in installments and the need for training of employees
may also place unique burdens on the buyer justifying additional time within which to perform
inspections.[343] Moreover, the ultimate disposition of the goods after delivery also may be
relevant to this inquiry. The two states that have placed primary importance on this factor have not
set specific times for the occurrence of inspections, although they require that these inspections occur
prior to the processing, transformation or incorporation of goods into the manufacturing process.
[344]

By contrast, other courts have established specific deadlines for the completion of the buyer's
inspection, specifically supporting a deadline for inspection with respect to perishable goods. In this
regard, national courts have required the inspection occur immediately upon delivery of the goods
to the buyer.[345] This is an understandable result given the consequences of delays in
inspections with respect to such goods. However, several national courts have extended this
inspection upon delivery requirement to nonperishable goods as well.[346] Courts in two states
have adopted a more lenient approach by granting buyers one week from the time of delivery to
complete their inspection.[347][page 361]

National courts have also addressed the time within which the buyer's inspection must occur in the
event of redirection or reshipment of the goods to the ultimate consumer. Article 38(3) appears to
grant buyers some leeway in the event inspection is rendered impractical by surrounding
circumstances, such as the necessity of significant unpacking prior to inspection. However, Article
38 does not define the circumstances under which this deferral is available or the time within which
the inspection must be completed upon the arrival of the goods at their final destination.

There is less case law with respect to the timeliness of inspection in the event of transshipment than
inspection pursuant to Article 38(1). Nevertheless, existing jurisprudence has exhibited a common
theme of strict construction. Strict construction of Article 38(3) is evident in three separate holdings.
First, inspection may be deferred pursuant to Article 38(3) only when the buyer is a mere intermediary
or when the goods are delivered directly to end-users.[348] By contrast, inspection may not be
deferred when the buyer takes possession of the goods without advance knowledge at to what extent,
when and to whom the goods will ultimately be resold.[349] Second, if the buyer serves as a mere
intermediary or direct delivery occurs, inspection may be deferred only if the buyer can demonstrate
the absence of a "real opportunity" to examine all of the goods.[350] By contrast, if only a
portion of the goods is retransmitted to the ultimate end user, the buyer is still under an obligation
to inspect those goods remaining in its possession.[351] The failure to conduct a timely
inspection prevents the buyer from rejecting the goods for non-conformity pursuant to Article 38. The
buyer may also lose its ability to defer inspection pursuant to Article 38(3) if the goods were
reprocessed or repackaged prior to their shipment to the end user.[352] Finally, any delays by
the end user in inspecting the goods or transmitting notice of non-conformity are attributable to the
buyer and may prevent the utilization of Article 38 as a basis for rejection.[353]

A separate issue addressed by national courts is what constitutes a reasonable inspection. The buyer
is not required to make an examination that would reveal every possible defect. Rather, the buyer's
inspection must be reasonable under the circumstances and is dependent upon the provisions of the
contract in question, usage of the trade, the type of goods, and the technical facilities and expertise
of the parties. [page 362]

Four general rules emerge from an examination of the opinions with respect to the thoroughness of
the inspection required by Article 38. The buyer has an affirmative obligation to examine the
packaging to discover any non-conformity readily apparent from such inspection, including labeling,
weight and date of production.[354] Failure to discover any such non-conformity will prevent the
buyer from rejecting the goods pursuant to Article 38. Next, buyers are required to carefully examine
the goods themselves and discover readily apparent non-conformities. The opinions have not defined
what constitutes an apparent non-conformity. However, national courts have held discrepancies in
color, weight and consistency to be apparent non-conformities.[355] Additionally, buyers are
excused from a complete examination of the goods in the event the quantity or nature of the product
renders comprehensive inspection unreasonable. However, buyers are not completely excused from
conducting inspections under such circumstances. Rather, buyers are required to sample or spot
check the product upon delivery and discover and report any apparent non-conformities.[356]
Buyers may not rely upon sampling or spot checking in the event previous shipments from the seller,
if any, were non-conforming.[357] Buyers are not required to discover non-conformities that have
been actively concealed by their sellers.[358] In any event, the burden of proving reasonable
inspection rests with the buyer.[359]

The final issue addressed by national courts is the enforceability of contractual provisions abrogating
the inspection duties of Article 38. Commentators have noted that the provisions of Article 38 are
optional, and the parties are free to contract upon different terms, including provisions for the
inspection of goods and notice. Several national courts have addressed this issue in their opinions.
The intent of the parties to derogate from the provisions of Article 38 must be clearly stated in the
parties' agreement. In this regard, the party seeking enforcement of such a provision must
demonstrate that both parties were aware of the potential applicability of the CISG and expressly
intended to exclude it from their agreement.[360][page 363] Language purporting to derogate
from Article 38 must clearly provide for exclusion of its provisions and cannot be implied from related
terms.[361]

Upon a finding of an express intent to derogate from Article 38, the parties may elect to set specific
time periods for the performance of inspections or to rely upon time periods established by usage and
custom of the trade. If the parties elect to set specific dates in their contract, notices must be sent
within these time periods in order to be valid.[362] Periods of time upheld in the opinions of
national courts range from eight to fourteen days of delivery.[363] The time periods for
inspection and the provision of notice may also be based upon usage and custom of the trade.
[364] However, parties relying upon such provisions bear the burden of proof with respect the
custom or usage, its applicability to the trade at issue, and the intent of the parties to incorporate it
in their agreement.[365] In addition, parties cannot rely upon usage and custom if the agreement
establishes specific periods for the performance of inspections and provision of notice of
non-conformity.[366]

2. Notice of Non-conformity: Article 39

The majority of the opinions of national courts on inspection and notice have focused on interpreting
Article 39. These opinions have focused on determining a reasonable time for notice of lack of
conformity, the buyer's obligations with respect to the discovery of defects, and the specificity of the
required notice.

There are numerous opinions of national courts addressing the time in which the buyer must give
notice of lack of conformity to the seller. Unfortunately, these opinions are completely lacking in
uniformity. The opinions have required notice within a wide range of time from immediate to an
extended period of time after delivery. The one common element of these opinions is the placement
of the burden on the buyer to demonstrate the reasonableness of the time in which it gave notice of
non-conformity to [page 364] the seller.[367]

An initial group of opinions held that notice of non-conformity needed to be sent within an immediate
or very short period of time. For example, a national court in Denmark required a Russian purchaser
of a load of fish give "prompt" notice of the non-conformity of the species ultimately delivered by the
seller.[368] In a similar vein, a Belgian court held that the Dutch buyer of neon signage was
required to give notice of non-conformity to the Belgian seller within a "short time."[369] By
contrast, a Dutch court required notice of non-conformity of cheese products within a short period
of time after delivery.[370] Similarly, a German court held that a German buyer of textiles that
failed to provide notice of non-conformity to the French seller within a few days of delivery was not
in compliance with the requirement of reasonable notice set forth in Article 39.[371]

Some courts have linked the time within which inspection must occur pursuant to Article 38 to the
time within which notice of non-conformity must be given pursuant to Article 39. For example, a
German court required immediate inspection and notice of non-conformity by a German purchaser of
flowers from an Italian seller.[372] Similarly, another court required that a German buyer of
shoes provide the Italian seller notice of non-conformities one day after delivery.[373]

There are another group of opinions that have granted buyers extended periods of time to give notice
of non-conformities. For example, despite the ease of discovery of non-conformities in a shipment of
lambskin jackets from a Swiss seller to a buyer in Liechtenstein, a Swiss court held that the buyer had
seven to fourteen days within which to notify the seller.[374] In a similar fashion, a German court
required an Austrian buyer to inform a German seller of non-conformities in plastic granulate within
eight days of delivery.[375] This period of time was extended to ten days by a different German
court.[376] Two courts have extended the notice period to two weeks [page 365] for similar
goods.[377]

The national courts of four states have extended the period of notification beyond two weeks. These
cases have set a specific time for notification of non-conformities beyond two weeks or have set an
indefinite period of time for such notification depending on the circumstances. For example, courts
in Germany and Switzerland have granted buyers one month from the date of delivery to notify sellers
of non-conformities. This one-month period has been deemed applicable to a wide range of perishable
and nonperishable goods.[378] By contrast, national courts in Italy and the Netherlands have
refused to set specific dates for the buyer's notification. Specifically, an Italian court held that a
German buyer of vulcanized rubber should have provided notice to the Italian seller of
non-conformities immediately upon processing the product.[379] However, the court did not set
a time within which such processing was to occur other than to note that four months after delivery
was untimely.[380] A similar result was reached by a court in the Netherlands in its determination
that a Greek buyer of furs from a Dutch seller should have provided notice of non-conformities prior
to processing of the product.[381] The Dutch court did not set a specific time for such
processing to occur other than to conclude that notice provided three weeks after delivery was
untimely.[382]

There are far fewer cases addressing the time within which notice must given in the event of
redirection of the goods in transit by the buyer to a third party. Opinions have established two
preconditions for granting delays in providing notice of non-conformity. Initially, delays in providing
notice will only be permitted when the buyer serves as a simple intermediary or when the goods are
directly delivered to the end user.[383] Delays in providing notice will not be excused when, at
the time of the delivery at the buyer's facilities, the buyer does not know to what extent and when the
goods will be resold to its customers.[384] In addition, delays will not be countenanced in the
event that the buyer has a "real opportunity" [page 366] to examine the goods despite their
transshipment to a third party end user.[385]

In the event of transshipment, national courts have not permitted prolonged delays in giving of notice.
In a case involving the sale of adhesive foil covers by a German seller to an Austrian buyer, the court
held that notice of defects provided twenty-four days after delivery of the goods to the ultimate end
user was untimely.[386] The court held that notice within ten or eleven days after delivery was
reasonable under the circumstances.[387] A key fact was that the defect was apparent and could
easily have been discovered by the buyer and its end user upon delivery.[388]

A number of decisions have upheld the enforceability of contractual provisions altering the notice
requirements of Article 39.[389] However, in order for such an alteration to be effective,
particularized consent [390] must be given by the disadvantaged party. The party must have been
aware that the CISG is applicable to the specific contract in question and demonstrate an affirmative
intent to exclude its application.[391] Furthermore, the period of time selected by the parties for
the provision of notice must be reasonable.[392] The opinions of national courts to date have
found contractually designated periods of time ranging from eight to fourteen days to be reasonable
and thus enforceable.[393] Courts in Germany and the Netherlands have also accepted
notification periods consistent with accepted usages within the trade.[394]

The requirement of timely notice also raises the issue of the buyer's obligation with respect to the
discovery of defects. The court opinions focus on the ease of discovery of the alleged non-conformity.
In addition, [page 367] court opinions concluding that the buyer's notice was untimely have
concentrated on whether the defect was apparent from examination of the goods at the time of their
delivery, from the time of subsequent processing, or at the time they were incorporated as a
component in an end product. In Handelsagentur v. DAT-SCHAUB A/S,[395] a Danish court
refused to excuse an untimely notice with respect to non-conformities that were easily detectable upon
the completion of a reasonable inspection at the time of delivery. German and Dutch courts have
declined to give effect to notices when the defects were readily apparent upon subsequent processing
that was to occur as soon as practicable after delivery.[396] The buyer's notice obligations are
also triggered by defects that become apparent when the goods are incorporated into an end product.
[397]

By contrast, untimely notice of defects will be excused in the event the non-conformity was one of
which the seller knew and actively concealed it from the buyer. Thus, a German court excused an
untimely notice from a German buyer with respect to wine that was intentionally adulterated with
water by an Italian seller.[398] Similarly, a Dutch court excused untimely notice from a Dutch
buyer with respect to infested cheese delivered by an Italian seller.[399] National courts have also
excused untimely notice in the event the defect could only have been discovered through the
performance of inspections that are not customary in the trade.[400] At least one court has also
excused untimely notice when the non-conformity is such that its existence could only have been
detected by a highly trained expert, such as [page 368] a health professional.[401] In any event,
the burden of presenting evidence with respect to the seller's misconduct or knowledge or the latency
of the non-conformity rests with the buyer.[402]

The courts have dealt with Article 39's requirement of specificity of notice. The specificity of notice
is important in informing the seller of what actions are necessary to remedy the non-conformity and
provides the seller with a basis for conducting his own examination of the goods.[403] As a
result, a notice merely stating that the goods are non-conforming is insufficient to excuse the buyer's
contractual performance.[404] If the non-conformity is capable of precise description, such
description must be provided to the seller on a timely basis.[405] Furthermore, the notice must
identify defects and demand remediation rather than constitute a request for assistance in addressing
specific problems.[406]

There are numerous cases in which buyers have lost their rights to reject goods because their notices
lacked specificity. A German court refused to give effect to a notice that informed the seller of
flowers that its goods were of "bad quality" and "poor appearance."[407] Similarly, German and
Italian courts have deemed notices stating that the goods are "defective" or "present problems" as
lacking sufficient specificity to be effective pursuant to Article 39.[408] A Swiss court refused
to give effect to a [page 369] notice an Italian seller that its furniture had "wrong parts" and was "full
of breakages."[409]

German courts have devised rules with respect to specificity of the required notice in the event the
subject matter of the contract consists of an integrated system or multiple components or deliveries.
With respect to an integrated system containing defects, the notice of non-conformity must specifically
identify the defective components.[410] Reference to the system in its entirety is insufficient to
satisfy the requirements of Article 39.[411] Rather, the notice must precisely identify the
defective components by serial number and date of delivery.[412] Similar rules are applicable to
sales consisting of multiple items or deliveries. In such circumstances, the notice must identify those
items or deliveries that are defective.[413] A notice deeming the entire performance to be
defective not specifically identifying the items or specific deliveries do not meet the strict
requirements of Article 39.[414]

3. Reasonable Excuse: Article 44

National courts interpreting Article 44 have focused on one primary issue, specifically, the
determination of reasonable excuses for failure to give notice of non-conformity of goods as required
by Article 39. This provision has been subject to criticism by academics for its lack of clarity and
resultant liberality in excusing tardy or absent notices pursuant to Article 39.[415] Article 44 has
also been criticized for its lack of clarity as to what constitutes a "reasonable excuse."[416] As
a result, at least one commentator has recommended that sellers protect themselves from the
uncertainty arising from Article 44 by varying the CISG's notice provisions by agreement, including
the elimination of excuses for failure to provide [page 370] notice.[417]

The sparse case law interpreting the reasonable excuse provision of Article 44 is inconsistent with
these criticisms. Rather, the national courts that have addressed this issue have proven most reluctant
to excuse noncompliance with Article 39. These opinions have cited numerous reasons for refusing
to conclude that a buyer's failure or delay in providing notice was excusable. A Dutch court noted
that a Greek buyer could not use Article 44 as an excuse for a three-week delay in providing notice
to a Dutch furrier since the defects were easily detectable through a sampling of the goods.[418]
Reasonable excuse also does not exist if the buyer delays in communicating consumer complaints.
[419] A German court rationalized that a restrictive use of excuse is necessary due to the fast
paced nature of business. There is often need for prompt action that is dependent upon timely notice.
[420] However, this same court found that the granting of an excuse for untimely notice is less
justified when the purchaser is an experienced and sophisticated participant in the international
marketplace.[421] The court noted that it would be easier to accept excuses from single traders
and artisans.[422] At this time, the nature of the differences necessary to justify different
treatment and the specific excuses that would be acceptable to a national court remain indeterminate.

B. Payment of the Price and the Taking of Delivery

The buyer is obligated to pay the contract price for the goods and take delivery in the event they are
conforming or have otherwise been accepted without objection. These obligations are set forth in
Articles 54 through 60 of the CISG. Initially, the buyer's obligation to pay the contract price includes
compliance with all formalities as may be required by the contract or pursuant to applicable laws and
regulations to enable payment to be made.[423] Where the sales contract has been concluded,
but the parties have failed to expressly or implicitly fix or make provision for price, the parties are
considered "to have impliedly made reference to the price generally [page 371] charged at the time
of the conclusion of the contract for such goods sold under comparable circumstances in the trade
concerned."[424] In addition, if the price is fixed according to the weight of the goods, such
reference will be interpreted as net weight in the absence of language to the contrary.[425]

Article 57 governs the place of the buyer's obligation to remit payment. In the event the contract
does not specify the place of payment, the buyer must make payment at the seller's place of business.
[426] However, if the payment is to be made against the handing over of goods or documents,
the buyer is to make payment at the place of the handing over.[427] The seller is responsible for
increased expenses incurred by the buyer in satisfying its payment obligation caused by the seller's
change in its place of business subsequent to the conclusion of the sales contract.[428]

Article 58 governs the circumstance where the sales contract fails to establish a specific time for
payment. In the event of the absence of a specific time, the buyer must remit payment when the seller
places the goods or documents controlling their disposition at the buyer's disposal.[429] The seller
is permitted to condition the handing over of the goods or controlling documents upon such payment.
[430] By contrast, if the contract provides for carriage of the goods, the seller may dispatch the
goods on terms whereby the goods or controlling documents thereto, are not to be handed over to
the buyer without payment of the price.[431] In any event, the buyer is under no obligation to
pay the contract price until it has the opportunity to examine the goods.[432] However, the buyer
must remit the contract price in the event the procedures for delivery or payment agreed upon by the
parties are inconsistent with the opportunity for inspection.[433]

Regardless of any uncertainty with respect to the price or place and time of payment, the buyer must
pay the contract price without the necessity of a request by the seller or its compliance with any
formality.[434] The buyer must also take delivery of the goods, which consists of the
performance of all acts reasonably necessary to enable the seller to make delivery and the buyer to
take possession of the goods.[435][page 372]

1. Formalities of Payment: Article 54

National courts have focused on one issue arising from Article 54. This issue is the enumeration of
formalities with which the buyer must comply in order to enable payment of the price. The formalities
identified by the national courts consist of two requirements. The courts of Austria and Switzerland,
and the Court of Arbitration of the International Chamber of Commerce, have required buyers to
open letters of credit where required by the terms of the sales contract.[436] Compliance with
Article 54 also requires the buyer, where necessary, to comply with currency exchange regulations,
including authorization to transfer currency.[437] However, despite these opinions, there is no
requirement that the buyer needs to succeed in its efforts to comply with contractual formalities.
Failure to satisfy required formalities does not constitute a breach. The buyer must make a good faith
effort to satisfy the requirements of the contract and cannot use its own lack of action as an excuse
for failure.[438] The seller cannot hinder the buyer's attempts to comply with these formalities.
[439]

2. Place of Payment: Article 57

National courts interpreting Article 57 have focused their attention on two issues. These issues are
whether Article 57 is a grant of personal jurisdiction to national courts and the enforceability of forum
selection agreements to avoid the exercise of such jurisdiction. The issue of whether Article 57 grants
jurisdiction to national courts with respect to disputes concerning payment of the purchase price
independent of national laws remains unresolved. There is no shortage of judicial opinions confirming
jurisdiction where the seller's place of business is located within the court's national boundaries.
[440] However, none of these opinions expressly [page 373] conclude that Article 57 constitutes
a grant of jurisdiction separate and apart from national laws. As such, the better interpretation is that
Article 57 confirms the conclusion reached in domestic rules of procedure, jurisdiction and venue,
specifically, that the place of business or habitual residence of the seller will serve as the forum for
all disputes with respect to payment of the purchase price absent a contrary agreement of the parties.
The issue may ultimately prove irrelevant to the extent that the result reached through the application
of Article 57 is the same as if it constituted a separate grant of jurisdiction by requiring disputes
arising from the payment of the purchase price to be determined in the national courts of the seller's
place of business.

Regardless of the ultimate resolution of the above issue, parties to sales transactions subject to the
CISG are well-advised to utilize choice of forum provisions. Unlike many other provisions within
the CISG, there is broad consensus among national courts with respect to the enforceability of forum
selection agreements and their impact on the operation of Article 57. These opinions have uniformly
held that courts must give effect to the provisions of Article 57 with respect to the location of dispute
resolution in the absence of a contrary selection by the parties in the sales contract.[441]

In order to supplant the operation of Article 57, the forum selection agreement must comply with
stringent requirements established by national courts. The forum selection provision should be
express.[442] Past practices between the parties in prior transactions are not sufficient to
overcome this requirement.[443] In addition, the mention of bank accounts and other commercial
relationships in states other than where the delivery of the goods occurs is insufficient to constitute
a forum selection agreement in the [page 374] absence of an express intent by the parties.[444]
Finally, usage of the trade in question also fails to constitute a forum selection agreement in most
circumstances.[445] Such usages would only serve to select the forum if it was widely known
in the trade that certain actions undertaken by the parties to the transaction had the indelible effect
of selecting an exclusive forum for the resolution of disputes between the parties other than as
established by Article 57.[446]

3. Time of Payment: Article 58

Courts interpreting Article 58 have focused the identity of the documents controlling the disposition
of the goods. Academics commenting on Article 58 have noted the uncertainty associated with
specific identification of these documents. One commentator has concluded that this reference is
extremely broad and is not necessarily limited to negotiable documents of title.[447] Rather,
other documents, such as insurance policies and certificates of origin, may also relate to the goods
and affect the buyer's ability to accept their delivery.[448] Under such circumstances, the delivery
of such documents must be part of the seller's performance in order to trigger the buyer's payment
obligation.[449] By contrast, the buyer would be required to pay the purchase price upon the
seller's failure to deliver other documents of less importance to the consummation of the transaction.
[450] Under such circumstances, the buyer may still avail itself of legal or equitable remedies,
such as specific performance, in the appropriate national court.[451]

It is clear from the opinions to date that, in the absence of specific provisions within the contract
establishing the time for the buyer's payment of the price, payment is due upon delivery.[452] In
addition, as a general rule, documents controlling the disposition of the goods are to be procured by
the party responsible for their exportation.[453] It is important to note that this [page 375] does
not necessarily refer to the seller in every case. [454] Rather, in the one case addressing this issue,
the court held that the seller was responsible for procuring customs documents only if so provided
by the sales contract.[455] The absence of a developed body of case law surrounding this issue
perhaps suggests that the uncertainty is more of an academic interest rather than one presenting
practical difficulties for businesses operating in the global marketplace.

C. The Consequences of Breach of Contract

The CISG provides for numerous procedures and remedies in the event of late performance by the
seller or default by the buyer. These procedures and remedies are set forth in Articles 47, 48 and 61
through 65. The initial procedure established by these articles relates to late performance by the
seller. In such circumstances, the buyer may set an additional period of time of "reasonable length"
for the seller's performance.[456] The buyer may not resort to any remedy for breach of contract
during this period of time unless the buyer receives notice from the seller that it will not perform the
contract regardless of any such extension.[457] However, the buyer may claim damages resulting
from the seller's delay in performance.[458] In addition, the seller may, after the date of delivery,
remedy, at its own expense, its failure to perform.[459] Despite this provision, the seller must
be able to remedy its failure without "unreasonable delay and without causing the buyer unreasonable
inconvenience or uncertainty of reimbursement of expenses advanced by it."[460] The seller may
request the buyer to make known whether it will accept such performance, and the buyer is required
to respond to this request within a reasonable time.[461] Such request is in fact assumed to be
contained in any notice by the seller that it will perform within a specified time.[462] If the buyer
does not respond, the seller may perform the contract within the time set forth in the request.
[463] However, the request is not effective unless actually received by the buyer.[464][page
376]

Articles 61 through 65 provide remedies for breach of contract by the buyer. As a general
proposition, in the event of default by the buyer, the seller may exercise its rights pursuant to Articles
62 through 65 and Articles 74 through 77.[465] The exercise of these remedies does not deprive
the seller of any rights to claim damages pursuant to other provisions of the CISG.[466]
Furthermore, the buyer is not entitled to receive additional time to perform by a court or arbitral
tribunal in the event the seller seeks relief for breach of contract.[467] However, the seller may
not seek a remedy inconsistent with any attempt to require the buyer to pay the price, take delivery
of the goods or perform other contractual duties.[468]

The seller has numerous options in the event of the failure of the buyer to perform its contractual
obligations. Article 63 provides that the seller may fix an "additional period of time of reasonable
length" for the buyer's performance.[469] The seller may not resort to any remedy for breach of
contract during any extension granted pursuant to Article 63.[470] The seller is however entitled
to claim damages incurred as a result of the buyer's delay in performance.[471]

The seller also retains the option of declaring the contract avoided. This declaration is limited to two
specific circumstances. Initially, the seller may declare the contract avoided in the event that the
buyer's failure to perform its obligations amounts to a fundamental breach of contract.[472]
Second, the seller may declare the contract avoided if the buyer fails to perform the contract within
the additional period of time granted by the seller pursuant to Article 63 or states its intention not
perform within this period of time.[473] This right to declare the contract avoided is further
limited in those circumstances where the buyer has paid the price. In such circumstances, the seller
may not declare the contract avoided unless it does so "in respect of late performance by the buyer,
before the seller ... become[s] aware that performance has been rendered."[474] The seller may
also declare the contract avoided in the event of breaches other than late performance "within a
reasonable time after the seller knew or ought to [page 377] have known of the breach."[475]
The right to avoid the contract also exists when the buyer fails to perform its obligations within any
additional period of time fixed by the seller or advises the seller that it will not perform its obligations
within such additional time.[476]

Finally, Article 65 governs in the event that the buyer's breach consists of its failure to advise the
seller of the form, measurement or other features of the goods that are the subject matter of the
contract. In the event the buyer fails to provide the seller with such specifications within the time
provided by the contract or within a reasonable time after receipt of a request from the seller, the
seller may make the specification itself in accordance with the buyer's requirements known to the
seller.[477] The seller is required to inform the buyer of the details of the selected specifications
and set a reasonable time within which the buyer must provide different specifications.[478] The
seller is entitled to utilize its selected specifications if the buyer fails to communicate different
specifications within the set by the seller.[479]

1. Nachfrist Notice: Article 47

Article 47 gives the buyer the right to grant additional time to the seller for performance. The failure
of the seller to perform within this additional period of time permits the buyer to avoid the contract.
This request for additional time, known as nachfrist notice in German law, is commonly found in the
civil law legal systems.[480] The underlying premise behind the concept is that delayed
performance does not necessarily translate into a material breach. National courts called upon to
interpret the CISG's provisions with respect to breach of contract have concentrated on two issues
raised by Article 47. The first issue is what constitutes a reasonable period of time granted by the
buyer in order for the seller to complete performance? The time extension must be reasonable in
length in order to prevent buyers from avoiding contracts on the basis of inconsequential delays in
performance.

The three national courts that have addressed this issue have taken somewhat different approaches.
One German court focused upon the need for specificity in setting the time extension.[481] A
buyer granted an eleven [page 378] day extension to a seller to deliver all components of the printing
machinery that was the subject matter of the contract. In upholding the buyer's right to declare the
contract to be in breach, the court held that the specific period of additional time established by the
buyer for performance was not unreasonable. Thus, the buyer was entitled to avoid performance of
the contract. Other courts have permitted buyers to avoid sales contracts on the basis of notices that
were not specific with respect to the additional period of time granted to the sellers for performance.
A French court for example, permitted a buyer to avoid performance of a sales contract for high
technology machinery on the basis that the seller advised the buyer of its intent to repair the
machinery subsequent to its delivery.[482] The failure of the seller to effect adequate repairs
pursuant to its promise justified the buyer's attempt to avoid the contract even in the absence of a
specific time granted by the buyer for such repairs.[483] Under this version of Article 47, the
time extension need not be precise but rather only capable of judicial interpretation as reasonable.
[484]

The second issue addressed by the courts is the effect of the buyer's failure to grant the seller
additional time for performance under Articles 47. Decisions on this issue have varied depending on
whether the buyer ultimately seeks equitable or legal relief. The buyer may be barred from declaring
contract avoidance by its refusal to grant the seller additional time [485] However, the buyer has
been allowed to declare the contract to be avoided in two circumstances. First, the buyer is free to
declare the contract avoided if the seller notifies the buyer that it does not intend to perform the
contract regardless of whether the buyer grants an additional period of time for performance.
[486] Second, the buyer may declare the contract to be avoided in the absence of a grant of
additional time if the seller promises to [page 379] perform the contract but only upon terms
inconsistent with the existing agreement between the parties or upon a renegotiation of the contract.
[487]

The buyer's failure or refusal to grant the seller additional time does not prevent him from obtaining
legal as opposed to equitable remedies.[488] Buyers are free to seek any number of damage
awards against breaching sellers. For example, an injured buyer may seek compensatory damages
resulting from the seller's breach of its obligations.[489] Buyers are also free to recover
additional costs associated with obtaining substitute performance, such as the difference between the
contract price and the price ultimately paid by the seller to obtain substitute goods.[490] In the
absence of a substitute purchase, the buyer's recovery is calculated as the difference between the
contract price and the current price of the goods at the time of the seller's breach by the buyer.
[491] Finally, the buyer may seek consequential damages consisting of lost profits assuming that
proper proof thereof is presented to the court.[492]

2. Late Performance: Article 48

Courts applying Article 48 have focused on two issues. The initial issue addressed by national courts
is what constitutes an unreasonable delay in performance as to constitute a fundamental breach of
contract. Article 48 recognizes the buyer's right to use or resell tendered goods or to seek substitute
performance. However, the buyer's rights are to be balanced against the seller's right to remedy its
defective performance. In striking this balance, courts must first consider the nature of the
non-conformity of the tendered goods and the readiness of the seller to remedy the non-conformity.
[493] This determination is also dependent upon the consent of the buyer to the late performance.
However, the buyer may not [page 380] unjustifiably reject attempts by the seller to remedy the
non-conformity through the delivery of substitute goods in a prompt fashion.[494] This
conclusion has caused one arbitral panel to conclude that the seller has a right to remedy
non-conformities in its performance which is impervious to interference by the buyer.[495] The
buyer may decline to accept the seller's tender of conforming goods only if it would have incurred
substantial and serious injury by waiting. In defining substantial and serious injury, one national
court has focused upon the production stoppage caused by the delivery of non-conforming goods.
[496]

The second issue addressed by courts interpreting Article 48 is identification of damages that are
properly recoverable by buyers. As set forth in judicial interpretations of Article 47, buyers are
entitled to a wide variety of damages in the event the seller fails to tender conforming goods or where
late tender causes unreasonable inconvenience. Buyers are generally entitled to compensatory
damages, such as cost to the buyer of purchasing substitute performance from third parties. By
contrast, the buyer who retains the goods is entitled to a price reduction equal to the reduced value
of the goods.[497] Buyers may recover other damages incurred by its retention of
non-conforming goods, such as treatment costs and other costs associated with remedying the
non-conformities.[498]

3. Avoidance of Contract: Article 64

Courts interpreting Article 64 have focused on what constitutes a fundamental breach by the buyer
that would permit the seller to declare the contract void. The opinions have failed to reach a definition
of fundamental breach. However, it is apparent from the opinions that in order to constitute a
fundamental breach, the buyer's failure to act must not be easily repairable.[499] Based upon this
general conclusion, the opinions of the [page 381] national courts may be organized into three
separate categories.

The first category of cases concerns delays in the buyer's performance. In this regard, a fundamental
breach occurs if it is readily apparent to the seller that the buyer has no intention of fulfilling its
contractual duties.[500] Under such circumstances, the seller is relieved of its obligation to
tender a performance rendered useless as a result of the buyer's anticipatory breach.[501] In a
similar fashion, the failure of the buyer to perform the contract during any additional period of time
granted by the seller may also be deemed a fundamental breach.[502] The same conclusion holds
true when the seller does not formally grant an additional period of time to perform but nevertheless
delays in filing litigation or seeking other remedies against the buyer.

It is important to note that not all delays in performance constitute a fundamental breach. Minor
delays in performance do not constitute fundamental breaches of contract.[503] One court
concluded that, in order for the seller to declare the buyer's delayed performance to be a fundamental
breach, the contract must provide that the time of performance is of the essence.[504] Time may
be of the essence either through the express declaration of the parties or through surrounding
circumstances, such as the foreseeability of damage to the subject matter of the contract in the event
of a delay.[505]

The second category of cases concerning fundamental breach relates to problems associated with the
remittance of the buyer's payment pursuant to the contract. Courts interpreting the CISG have
concluded that buyers have an unconditional obligation to remit payment for tendered goods without
[page 382] formal demand from their sellers.[506] As a result, the failure of the buyer to remit
payment to the seller for conforming goods tendered pursuant to a sales contract within the CISG
constitutes a fundamental breach permitting the seller to avoid performance. This failure to remit
payment may take many forms. However, the most common form is the buyer's failure to open or
establish a letter of credit as required by the sales contract.[507] Less certain with respect to the
determination of a fundamental breach are circumstances surrounding the buyer's operations that
indicate the unlikelihood of payment.

The third category of decisions relating to the identification of fundamental breach concerns issues
arising from delivery. An initial group of cases found a fundamental breach arising from the buyer's
unjustifiable refusal to accept delivery of goods from the seller. The buyer's non-acceptance may
simply consist of a refusal to accept a delivery of conforming goods tendered pursuant to the
contract.[508] However, the refusal to take delivery need not consist of a rejection of the entire
delivery tendered. At least one court has concluded that the buyer's failure to take delivery of 50%
or more of the goods tendered constitutes a fundamental breach upon which the seller may avoid
further performance.[509] Finally, the seller may avoid further contractual performances in the
event that the buyer fails to disclose the ultimate destination of the goods.[510] A fraudulent
[page 383] disclosure in this regard also constitutes a fundamental breach.[511]

This part focuses on the duties of sellers in the CISG-governed transaction. The seller has the basic
duty, of course, to attend to timely delivery of conforming goods and documents, free of the
unexpected claims of third parties. This part analyzes the issues associated with the delivery of goods
and the handing over of documents; the conformity of the goods and third party claims; and remedies
for breach of contract by the seller. It reviews how courts and arbitral panels have interpreted the
CISG obligations of the seller.[512]

A. The Duty of Delivery

The CISG requires the seller to "deliver the goods, hand over any documents relating to them and
transfer the property in the goods, as required by the contract."[513] The CISG specifies the
seller's obligations with respect to the place for delivery, arranging for the carriage of goods and their
insurance, the time of delivery, and the time and place at which documents are to be handed over.
These obligations are set forth in Articles 30-34.

As noted in Part II, an underlying principle of the CISG is the continuance of the contractual
relationship. Some commentators have noted that Article 30 contains "the beginnings of an obligation
to cooperate."[514] The Article 30 obligation is general and references the actual agreement of
the parties and the particulars of national law. It "states the obvious,"[515] that the seller must
deliver the goods, a principle of sales law that is near universal, for "there is no sale without delivery
and transfer of property."[516] Article 4 excludes from the scope of the CISG "the effect which
the contract may have on the property in the goods sold."[517] Thus, the duty to transfer the
property in the goods under Article 30 is subject to [page 384] the requirements of national law with
respect to property rights in goods.[518]

Article 31 addresses the circumstance in which the contract does not specify the place of delivery.
[519] In most transactions, these terms are specified by the use of customary delivery terms as
provided by INCOTERMS.[520] In the absence of such a specification, Article 31 serves as a
"gap-filling" provision. If the contract requires delivery to a carrier, then the seller's obligation of
delivery is satisfied by its handing the goods over to the first carrier.[521] If delivery of the goods
does not involve carriage, but the contract relates to specific goods, goods yet to be identified, or
goods to be manufactured at a specific place of which the parties were aware at the time of the
contract such as a warehouse or a manufacturing facility, then delivery is accomplished by "placing
the goods at the buyer's disposal at that place."[522] In other cases the seller's obligation with
respect to the place of delivery is met by "placing the goods at the buyer's disposal at the place where
the seller had his place of business at the time of the conclusion of the contract."[523]

The seller's obligations with respect to the carriage of the goods depend upon its obligations for
carriage provided in the contract. Normally, these obligations are implicated by the use of
INCOTERMS or customary delivery clauses. Article 32 of the CISG requires that if the seller hands
goods over to a carrier, then he must give notice of consignment specifying the goods to the buyer,
unless the goods are clearly identified to the contract by markings on the goods or shipping
documents. There is no obligation to mark the goods apart from those mandated in the contract.
[524] If the seller is obligated by the shipping terms to arrange for carriage of the goods, he must
"make such contracts as are necessary for carriage to the place fixed by means of transportation
appropriate to the circumstances and according [page 385] to the usual terms for such
transportation."[525] Finally, if delivery terms do not require the seller to obtain insurance of the
goods during carriage, then he must nonetheless provide buyer with "all available information
necessary to enable him to effect such insurance."[526]

The time for delivery of the goods is an integral part of the delivery obligation. Article 33 requires
the seller to deliver the goods on the date "fixed by or determinable from the contract."[527] Or,
if a period of time is specified within which the goods are to be delivered, the seller can deliver the
goods at any time within that period, "unless circumstances indicate that the buyer is to choose a
date."[528] A final "gap filling" provision permits the seller to meet his obligation with respect
to the time of delivery by delivery within a reasonable time after the conclusion of the contract.
[529]

The contract may -- by its specific terms or by its reference to customary terms such as INCOTERMS
-- require the seller to hand over documents, such as bills of lading, warehouse receipts, insurance
certificates, invoices, or certificates of origin, necessary for the buyer to take possession of the goods.
In that event, the seller is required by the CISG to hand over the documents relating to the goods "at
the time and place and in the form required by the contract"[530] If the seller hands over the
documents prior to that time, "he may, up to that time, cure any lack of conformity in the documents,
if [doing so] does not cause the buyer unreasonable inconvenience or unreasonable expense."
[531]

Finally, the seller has a further obligation to the buyer to preserve goods under circumstances in which
the buyer has delayed in taking delivery of the goods, or where delivery of the goods and payment
for them are concurrent obligations and the buyer fails to pay the price. Seller is obligated to take
reasonable steps to preserve the goods and can withhold delivery until the payment of any reasonable
expenses incurred in preserving them.[532][page 386]

1. Place of Delivery: Article 31

The place where the seller is obligated to deliver the goods matters in a variety of contexts. The
language of Article 31 makes clear that a contract that requires delivery to a third-party carrier is
effective when the goods are handed over to the first carrier, and not when they cross the border into
international commerce, nor when they arrive or are handed over to the buyer.[533] This applies,
however, only where the parties have not agreed otherwise. Typically, they do agree otherwise.
[534]

Most national courts interpret the place of delivery under Article 31 as the place of performance of
delivery for purposes of determining jurisdiction where the CISG governs the place of delivery.
[535] In a 1998 case, the French Court of Appeals in Paris [536] addressed a situation in
which the buyer, a French company, ordered winter clothing from a German seller. The goods were
subject to a contract specifying the INCOTERM "ex works," which the French court determined to
be the defendant's principal place of business in Germany. It declined jurisdiction in favor of the
courts of Germany.[537] Where the parties have not specified a place for delivery, French courts
have, consistent with Article 31(a), identified the place of delivery to be the place where the goods
were handed over to the first carrier for transmission to the buyer.[538] In these cases, the
French courts [page 387] have observed that the place of performance of the obligation to deliver
goods and the place of performance of the obligation to deliver conforming goods must be the same.
[539]

In a pair of 1998 cases, the Austrian Supreme Court ruled that the identification of the place of
delivery under Article 31 was not conclusive under the Lugano Convention on Jurisdiction and the
Enforcement of Judgment in Civil and Commercial Matters.[540] In the first case, the parties
identified delivery terms as "free construction site Vienna" and in the second as "free domicile
Klagenfurt." The German sellers in both cases claimed that the place of performance of the delivery
obligation were the respective towns in Austria, and that they could, therefore, bring suit in Austria.
The court rejected this claim, and refused jurisdiction, arguing that "according to Article 31 CISG,
terms like the ones used in the contract in question were insufficient to constitute a place of
performance and entail jurisdiction of the courts in the Austrian cites mentioned therein."[541]
In the absence of clear delivery terms, Article 31(a) would identify the place of delivery in Germany,
where the goods were handed over to the first carrier. These cases are inconsistent with the French
decisions on analogous facts. However, they may be distinguishable because of the lack of clarity in
identifying the seller's obligation of delivery in the contracts under review by the Austrian courts.

In a 1996 German Supreme Court case,[542] the German seller delivered almond paste to a
French buyer. The buyer brought an action for damages in a French court, while the seller brought
an action in a German court seeking a declaration of non-obligation to pay damages. The German
appellate court examined the various pieces of communication between the parties, in particular
communiqués in which the price was quoted "duty unpaid, untaxed, delivery being free to the door
of the place of the buyer's business." The appellate court held that the parties did not intend this
language to alter the place of performance but rather to relate to transportation costs and the
allocation of risk. Thus, the court upheld [page 388] jurisdiction of the German courts. The court
interpreted the term "delivery being free to the door of the place of the buyer's business" under Article
31 as being the handing over to the first carrier or at seller's place of business.[543]

Determination of the place of delivery under Article 31 is relevant to the buyer's obligation to pay and
to the passing of the risk of loss under CISG Articles 67-69. In a German case,[544] the sellers
were located in Austria and customarily placed manufactured furniture in a warehouse in Hungary
and then sent invoices to the buyer. According to a series of contracts governing various partial
deliveries of furniture, the buyer was to take possession of the goods at the manufacturing works and
load the furniture into railway wagons or trucks. The buyer would pay the sellers based on the
delivery invoices after taking delivery of the furniture. However, no delivery was taken; the
manufacturer went bankrupt, the warehouse closed, and the furniture disappeared. Seller sued for
the purchase price, which was denied on the ground that delivery had not occurred under Article
31(b). The delivery was due at buyer's demand, which had not been made, and the sellers had failed
to place the furniture at the buyer's disposal. Thus, the buyer's obligation to pay did not arise and the
risk of loss of the goods did not pass to the buyer.[545]

2. Time of Delivery: Article 33

Article 33 fixes the obligation of the seller to deliver the goods according to the contract terms or,
if the time of delivery cannot be ascertained from the contract, then within a reasonable time after the
conclusion of the contract. National courts and arbitral panels have applied this Article in cases
involving questions of whether a time for delivery was fixed in the contract; [546] where a time
was fixed but not met and the issue was whether this constituted a fundamental breach; [547]
where no time for [page 389] delivery was fixed and the reasonability of the time taken was in
question; [548] and in cases in which the buyer may have provided an additional period of time
for delivery under Article 47.[549] The scope of these cases indicate that the "reasonability"
standard in Article 33 provides courts with the flexibility to vary the time frame for delivering goods
depending on the nature of the goods and distance covered.

B. Express and Implied Warranties

This section addresses the issues of the seller's obligation for non-conforming goods or for goods with
respect to which third parties assert claims. These obligations are found in Articles 35-44 of the
CISG. Article 35 states the basic obligation of the seller to deliver goods of the quantity, quality, and
description [550] required by the contract.[551] Unless the parties have otherwise agreed, this
obligation is not met unless the goods conform to any express warranties, or if there are no such
warranties, then certain implied warranties. The basic implied warranty requires that goods be "fit
for the purposes for which goods of the same description would ordinarily be used."[552] They
must be fit for the special purposes of the buyer, where that purpose is expressly or impliedly made
known to the seller at the time of the contract. The seller also warrants, unless otherwise agreed, that
the goods will be "contained or packaged in the usual manner for such goods or, where there is no
such manner, in a manner adequate to preserve and protect the goods."[553] The implied
warranties do not attach where circumstances indicate that the buyer did not rely on the seller's skill
or judgment or where the circumstances indicate that it would be unreasonable [page 390] for the
buyer to do so.[554] In addition, these warranties do not apply to non-conformities the buyer
knew about, or should have known, at the time of the conclusion of the contract.[555]

While Article 35 establishes the obligations of the seller with respect to conformity of the goods,
Article 36 governs the seller's liability for lack of conformity of the goods. It identifies the point of
reference for the non-conformity at the time the risk passes to the buyer.[556] The CISG permits
the seller to cure any lack of conformity if he has delivered the goods before the "date for delivery,"
which would be the date fixed in the contract for delivery or a date within the period for delivery
identified in the contract. The cure may include delivering missing parts or making up deficiencies
in quantity of the goods or replacing non-conforming goods with conforming goods. The cure must
not cause unreasonable inconvenience or unreasonable expense to the buyer.[557]

The seller's obligation to deliver conforming goods relates to the reciprocal obligations of the buyer
to examine the goods (Article 38) and to give notice to the seller of non-conformities (Article 39).
[558] Failure to do either within a practicable or reasonable time causes the buyer to lose the right
to rely on a lack of conformity of the goods, unless the seller knew, or should have been aware of the
non-conformity and failed to disclose the non-conformity to the buyer.[559]

Third-party claims pose special issues of lack of conformity. The seller is obligated under Article 41
to "deliver goods which are free from any right or claim of a third party unless the buyer agreed to
take the goods subject to that claim or right."[560] However, Article 41 does not apply to rights
or claims based on "industrial property or other intellectual property" rights.[561] In that case,
Article 42 governs the obligations of the seller. [page 391]

Article 42 requires generally that the seller deliver goods "which are free from any right or claim of
a third party based on industrial property or intellectual property, of which at the time of the
conclusion of the contract the seller knew or could not have been unaware." This obligation only
pertains to third-party claims [562] based on the law of the State in which the buyer has his place
of business or the law of the State where the goods will be resold or used, provided that the parties
contemplated their resale or use in that State at the time the contract was concluded.[563] This
obligation of the seller does not extend to cases where the buyer knew "or could not have been
unaware" of the right or claim, and the seller has complied with technical drawings, designs, formulae
or other such specifications that are the basis for the third party claim or right.[564] Unless he
has a reasonable excuse for failing to do so,[565] or unless the seller knew of the right or claim
of the third party and the nature of it, the buyer loses the right to rely on Article 41 or Article 42 if
he fails to give notice to the seller of the right or claim and the nature of it, within a reasonable time
after he has become, or ought to have become, aware of it.[566]

1. Warranties: Article 35

Article 35 is implicated in many commercial sales disputes, undoubtedly because it goes to the very
heart of the seller's contract obligation. Many conflicts involve reconciling Article 35 with related
Articles identifying the rights of buyers when sellers breach their obligations under Article 35.
[567] A variety of issues, both factual and [page 392] interpretive, arise under Article 35(1) that
govern the seller's obligation to provide goods of the "same quality, quantity and description required
by the contract."[568] The factual cases, often in courts of first instance, involve evidentiary
inquiry to identify whether there was a non-conformity and, if so, its nature,[569] whether the
buyer inspected the goods in a timely manner and gave the seller adequate notice of the non-conformity,[570] and whether the goods were adequately packaged.[571] Other cases
involve interpretation of the contract description. Since national law may vary on this, court
applications have provided insight into questions of homeward trends [572] and uniformity of
interpretation.[573]

In a 1999 case,[574] the Austrian Supreme Court heard a dispute involving wall panels that were
to be sold "ex factory" from a business in Germany to a buyer in Vienna. The panels that were
shipped were non-conforming panels, in that they were not "formatted" (cut and drilled) as agreed
in the contract. The parties agreed, by telephone, that the panels would be shipped back by the buyer.
On inspection by the seller, the panels were found to be badly damaged and useless for resale. The
seller invoiced the buyer for the value of the panels, claiming that they were not shipped correctly and
that buyer had assumed the transportation risk.

The appellate court held that the shipping of non-conforming panels constituted a delivery of non-conforming goods and a breach of contract [page 393] under Article 35 rather than a non-delivery
of goods. The significance of the distinction lay in the seller's retention of the risk of loss under CISG
Article 82(2)(a) and (b). Under the Austrian Commercial Code ("HGB") a distinction would have
been made between delivery of non-conforming goods (Falschlieferung) and non-delivery of
conforming goods (Nichtlieferung). The distinction would turn on the extent of the deviation from
the contract and on whether the incorrect delivery was subject to approval. In refraining from
applying the domestic law, the court drew the distinction based on the authoritative CISG
commentary [575] used to interpret and apply the CISG Articles. Reliance on such commentary
indicates a commitment to interpret the CISG in a manner that tends to promote uniformity of
interpretation.[576]

Resistance to homeward trend interpretations was demonstrated again in a 2001 Belgian case.
[577] In that case, the buyer sought avoidance of the obligation to pay the contract price. The
buyer framed its case on "non-conforming delivery" and "latent defects," drawing on the Belgian Civil Code for authority. Relying on existing case law [578] and authoritative commentary,[579]
the Belgian court further held the CISG alone to be applicable law and insisted that "[t]he CISG
knows only one uniform concept of conformity."[580] Within the CISG "no distinction is made
between a guarantee against latent defects and the seller's obligation to deliver. The seller must
deliver conforming goods and that is all."[581][page 394]

An example of a court's application of CISG interpretive methodology is the 2000 Italian decision
in Rheinland Versicherungen v. S.r.l. Atlarex and Allianz Subalpina S.p.A.[582] The case turned
on whether adequate and timely notice of the non-conformity was given by the buyer to the seller.
In making the determination, the court referenced CISG case law from several nations, including
Italy,[583] Germany,[584] Austria, The Netherlands,[585] United States,[586]
France,[587] and Switzerland.[588] The court recognized the non-binding nature of these
cases, pointing out that the purpose of the case analysis was not to observe binding authority but "to
assure and promote uniform enforcement of the United Nations Convention."[589] This opinion
serves as an example of using CISG interpretive methodology to advance the goal of uniformity and
discourage resort to homeward trend analysis.[590][page 395]

Article 35(2)(b) addresses the sale of goods in which the seller is aware of the particular purpose for
which the buyer will use the goods and the buyer is relying upon the seller to use skill and judgment
to provide the goods. In effect, it creates an implied warranty for a particular purpose. The implied
warranty for a particular purpose [591] has been the subject of [page 396] several court cases.
[592] Some of these cases involved simply an analysis of whether the facts constituted a failure
to conform to the contract.[593] Others, discussed below, involved legal analysis that provides
greater insight into the courts and arbitral panels interpretation of this warranty.

As is the case under Article 35(2)(a) (implied warranty of merchantability), a seller is not responsible
to conform its products to the nuances of the national law of the buyer's country. However, the seller
may be responsible for such conformity under Article 35(2)(b) (implied warranty for a particular
purpose). In a German case,[594] the issue of whether a Spanish paprika seller had to certify that
its product complied with the German Food Safety Laws demonstrates this nuance. The court found
that the seller had prior knowledge of the laws and, therefore, could not argue that it was ignorant
of the requirement that the goods comply with the German laws. The court held that since the
paprika contained more ethylene oxide than permitted under German law, the goods failed to conform
to the contract and specifically failed to meet the buyer's purpose known to the seller.[595]

The crucial factors for applying the implied warranty for a particular purpose are the buyer
communicating the intended use of the product and the seller's knowledge of the nuances of the
foreign law or standards. A Netherlands Arbitration Institute case involving a dispute concerning the
conformity of a petroleum product illustrates the intended use criterion.[596] The buyer argued
that the product contained excessive amounts of mercury, which the seller knew -- because it was in
the refining business -- would [page 397] make the product unusable to the buyer. The arbitral
tribunal concluded as a factual matter that the buyer did not expressly or impliedly indicate to the
seller the use it intended to make of the product, and that the product had other uses in the refining
industry. Thus, the panel rejected the Article 35(2)(b) claim.[597]

The panel, however, did find for the buyer on its Article 35(2)(a) claim. In doing so it reviewed
different interpretation of merchantability. It first drew on the concept of "merchantability" or
"merchantable quality," a standard of conformity found in English common law. The second
interpretation is the average quality rule found in the German, Austrian, French, and Swiss civil codes. The tribunal also found this interpretation to be unsatisfactory. Instead, the panel drew on the
history of the drafting of the CISG and its interpretive methodology. First, the panel looked to
general principles, namely, that "[i]n the interpretation of this Convention, regard is to be had to its
international character and to the need to promote uniformity in its application and the observance
of good faith in international trade."[598] Second, it attempted to find an appropriate
interpretation through the use of implied principles taken from the different Articles of the CISG.
[599]

It interpreted this mandate to suggest that neither the merchantability test nor the average quality test
should apply, based as they are in domestic notions of quality. Rather, it resorted to the history of
the CISG and the legislative history preceding its adoption. In reviewing these documents, the
tribunal became convinced that the drafters declined to articulate a standard, leaving an "open-textured" provision. In the final analysis, emphasizing the absence of alternative buyers willing to pay
the contract price for product with that level of mercury, the tribunal concluded that the goods were
not merchantable judged by any of the available interpretations.[600]

In sharp contrast, the U.S. court in Circuit Schmitz-Werke GmbH & Co. v. Rockland Industries, Inc.[601] disregarded CISG interpretive methodology and resorted to a homeward trend analysis.
The court cited only U.S. cases and ignored other national court or arbitral decisions and scholarly
commentaries on the CISG. The court expressly ignored those sources by concluding that if the
CISG is "not settled under its own terms," [page 398] then a court could resort to private
international law. It then proceeded to analyze the problem under Article 2 of the Uniform
Commercial Code. [602]

Often times a contract is based upon a sample or model. Article 35(2)(c) requires the seller to
provide goods of equivalent quality to a sample or model upon which the contract was formed. A
Finnish court dealt with the issue of a contract based upon a sample and a seller's representation that
the product had a "shelf life" of 30 months.[603] The sample of the product tested before
delivery contained the specified vitamin content, but the product -- both on delivery and increasingly
over its life on the shelf -- deteriorated in Vitamin A content. The seller argued, pursuant to Article
35(3),[604] that buyer was aware of the Vitamin A deterioration over time and thus could not
have expected the content to remain in constant conformance with the sample for thirty months.

In deciding in favor of the buyer, the court relied not on Swiss law or trade usage but pointed instead
to the fact that the seller "must have been aware of the international content of the shelf-life concept."
[605] With respect to the seller's argument under Article 35(3), the court found it irrelevant that
the buyer knew Vitamin A deteriorated. "[I]t appears that the buyer counted on the seller's expertise
in terms of how the seller reaches the required Vitamin A content and how the required preservation
is carried out."[606] The court resisted a homeward trend solution by rejecting application of
domestic law. However, it also failed to consider the experience of other national courts in
interpreting the CISG.[607][page 399]

2. Risk of Loss and Warranties: Article 36

Article 36 fixes the point at which the seller's obligations pertaining to the conformity of goods
expires; when the risk of loss passes to the buyer or at the expiration of any express or implied
guaranty. The buyer is allocated the burden of proving that the goods were defective prior to the
expiration of the seller's obligation point. This was the issue in a German case involving the sale of
meat products.[608] Upon receipt, the buyer objected to the quality of the meat and sued for a
refund. The court reasoned that since the parties had not agreed otherwise, the risk of loss had
passed to the buyer when the seller handed over the goods to the first carrier. Therefore, under CISG
Articles 36 and 66, the buyer had the burden of proving that the goods did not conform to the
contract at the time the risk of loss passed. This burden, demonstrated here, is often difficult to
sustain.[609]

3. Effect of Seller's Knowledge: Article 40

Articles 38 [610] and 39 [611] require the buyer to examine the goods and give timely notice
to the seller of non-conformities. Article 40, in effect, excuses the buyer from the consequences of
failing to make timely examination of the goods and give notice of the non-conformities. If the seller
"knew or could not have been unaware" of the non-conformities and then failed to disclose them to
the buyer, the seller cannot rely on the buyer's failure of examination and notice. This provision has
occasioned discussion in case law [612] and commentary.[613] Some cases turn on whether
[page 400] the buyer can provide proof of the seller's knowledge of the non-conformity [614] or
on whether the seller disclosed the non-conformity to the buyer.[615] To the latter point, a recent
Belgian case characterized Article 40 as the application of "the good faith principle,"[616] noting
that if the seller knows of the non-conformity and fails to reveal it, he cannot fall back upon the
buyer's failure to tell him what he already knew.[617]

C. Remedies

The remedies for breach of contract by the seller are addressed in CISG Articles 45 through 52.
Article 45 outlines the basic remedies of the buyer for the seller's breach.[618] Article 45's
remedial framework does not distinguish between material and non-material breaches.[619]
Therefore, Article 45 must be read in conjunction with the notion of a fundamental breach described
in Article 25.[620] Enforcing its rights to substituted goods, [page 401] extension of time, and
avoidance found in Articles 46-52 does not prevent the buyer from subsequently seeking damages
under Articles 74-76.[621] To this end, the following sections will review the range of buyer
remedies outlined in Article 45.[622]

1. Right to Substituted or Repaired Goods

Article 46 gives the buyer the right to demand performance of the unperformed elements of a contract, a concept that draws from the civil law system but is considered an extraordinary remedy in the common law system.[623] Under Article 46, the buyer may demand delivery of substitute goods if the lack of conformity of the goods constitutes a fundamental breach if he gives notice under Article 39 or within a reasonable time thereafter.[624] However, this right may be limited in some countries by Article 28, which relieves a court of the obligation to order specific performance if such a remedy would not be granted under domestic law.[625] Finally, unless it is unreasonable under the circumstances, the buyer may require the seller to remedy the lack of conformity by repair. The request for repair must be made either in conjunction with notice give under Article 39 or within a reasonable time thereafter.[626] The buyer is not obliged to require the seller to remedy a breach; [627] he may instead move to his own [page 402] remedies such as declaring avoidance and seeking damages.

If the seller delivers only part of the goods, or if only part of the goods delivered is in conformity with
the contract, the buyer's remedies apply with respect to the missing or non-conforming part.[628]
Partial non-performance can be the basis for avoidance of the contract only if it amounts to a
fundamental breach. [629] Conversely, if the seller delivers the goods early, or if the seller delivers
a quantity of goods greater than that provided in the contract, the buyer may refuse early delivery
[630] and refuse delivery of excess goods.[631] If the buyer does take delivery of the excess
goods, he is obligated to pay for them at the contract rate.[632]

2. Right to Affix Additional Time

Under Article 47, the buyer may fix a reasonable period of additional time for performance by the
seller.[633] During that time, the buyer may not resort to other remedies unless the seller has
notified the buyer that he will not perform within the period fixed by the buyer.[634] The buyer
may unilaterally fix a time extension to overcome the presumption that a delayed performance does
not generally constitute a fundamental breach and to limit the time for the seller to cure its breach.
Article 48 allows the seller to cure any non-conformity "even after the date for delivery, remedy at
his own expense any failure to perform his obligations, if he can do so without unreasonable delay
and without causing the buyer unreasonable inconvenience."[635] However, the seller must notify
the buyer of its intent to deliver late. The buyer is then obligated to notify the seller if he intends to
accept the late delivery. In the event that the buyer does not respond, then the seller is automatically
granted the time extension.[636] From the buyer's perspective, the time extension provision in
Article 47 can be used to limit the seller's right to cure and to ensure that seller's failure to deliver at
the expiration of the extended time period is a fundamental breach under the CISG. The elevation
of untimely performance to the status of fundamental breach allows the buyer to avoid the contract.
The relationship between contract extension or nachfrist and contract avoidance will be further
explored in the next section. [page 403]

3. Right to Avoid Contract

As discussed in the preceding section, the buyer's right to avoid the contract under Article 49
[637] arises as a result of a fundamental breach of contract [638] or non-delivery by the seller
within the additional period of time fixed by the buyer under Article 47.[639] If, however, the
seller delivers the goods, the buyer's options change. If the goods are delivered late, the buyer must
declare the contract avoided within a reasonable period of time after he becomes aware of the late
delivery.[640] In the case of a lack of conformity, other than late delivery, the buyer must avoid
the contract within a reasonable time after he knew or should have known of the breach; [641]
after the seller has failed to cure the breach within the period set by the buyer under Article 47;
[642] after the seller has declared that he will not perform within such a period; [643] after the
expiration of any additional time period indicated by the seller under Article 48; or after the buyer has
indicated that he will not accept performance under Article 48.[644] The limitation of the
avoidance remedy to the above events is consistent with the CISG's underlying policy of contract
continuance. The importance of completing transactions is based upon the recognition of the high
costs of contract avoidance associated with international sales.[645]

Courts and tribunals have evolved a substantial body of law associated with Article 49.[646]
Conflicts appear to arise often as problems of whether a [page 404] fundamental breach has occurred
such as to give rise to the buyer's right of avoidance under Article 49(1)(a). Normally, the outcome
in those cases turns on interpretation of CISG Article 25. [647] Article 25's definition of
fundamental breach will be discussed in Part VI.[648]

Some cases have addressed the buyer's obligation to give notice of avoidance.[649] There is a
good deal of variability on the kinds of actions that constitute sufficient notice. One German court
held that under Article 27, the buyer need only prove that notice of avoidance was sent, not that was
received.[650] In contrast, another German court declared that the buyer "must expressly declare
the agreement avoided vis-à-vis the opposite party so that there are not any remaining doubts ... .
[S]uch a declaration of avoidance must be explicitly recognizable and realizable to the other party."
[651] A Russian arbitration panel disregarded the need for such a [page 405] formal declaration.
[652] It did not identify any specific action that the buyer needed to take, but indicated that a
study of the evidence demonstrated that "the [buyer] has demonstrated by [buyer's] statement of
action, if not earlier, that [buyer] had considered the contract as avoided."[653] Thus, the
formality and the content needed to satisfy the notice requirement under Article 49 has not been
clearly resolved.

The importance of the prompt notice was emphasized by another German court.[654] It denied
the buyer the right to avoidance because the declaration of avoidance occurred five months after the
breach. While Article 49(1)(b) does not explicitly require notice of avoidance within a reasonable
time, the court construed the language of the Section (Remedies for Breach of Contract by Seller),
as a whole, to require reasonably prompt notice.[655]

The question of timeliness of the notice of avoidance has arisen in cases involving Article 49(2) as
well. In T. SA v. E Audiencia Provincial de Barcelona,[656] a Spanish court found 48 hours to
be a reasonable time after a fundamental breach for giving notice of avoidance. In a novel situation,
the buyer was held to have forfeited the right to avoid the contract because the buyer failed to abide
by contractual terms obligating it to notify the seller of his intent to avoid within a specified time
frame.[657] In holding a one-day notice of avoidance to be timely and reasonable, a German
court likened the "reasonable time period" language of Article 49(2)(b) to the concept of [page 406]
promptness, or unverzüglisch, in the German Civil Code.[658] But in a 2002 case involving the
international sale of a stolen car, another German court held three months to be a reasonable time
period after learning of the failure of title in which to give notice of avoidance to the seller.[659]
In a Finnish case, the court held that three years was not a reasonable time period in which to give
notice of avoidance.[660] Thus, while timeliness is a continuing issue under Article 49, the fact
specific nature of most cases of timeliness makes uniformity of interpretation and application difficult
to assess.

4. Right to a Price Reduction

Under Article 50, the buyer can reduce the price of goods [661] that do not conform to the
contract, even if the price has already been paid.[662] To reduce the price, the buyer must simply
disclose the reduction, which does not preclude a claim for damages sustained due to the non-conformity. The reduction must be proportionate to the value at the time of delivery that the non-conforming goods bore to the value of the conforming goods. The CISG does not indicate the place
where the value of the goods will be assessed, but better thinking suggests it would be the place
"where the seller has to perform."[663]

The major issue under CISG Article 50 is the proper measure of price reduction.[664] Article
50 refers to "value" rather than to contract price. At least one arbitral tribunal, citing scholarly
authority, has identified the [page 407] buyer's place of business or the place where the goods will
be directed as the market in which value is to be ascertained.[665] Beyond that, ascertaining a
ratio of the value of the non-conforming goods relative to the value of conforming goods is an
evidentiary matter.[666]

This part focuses on the common obligations of buyers and sellers under the CISG. These common
obligations and concepts pertain to the passing of risk, fundamental breach, anticipatory breach, and
the consequences of breach. Consequences of breach focus on the calculation of damages, the
limiting doctrines of foreseeability and mitigation, the use of impediment as an excuse, the effects of
avoidance of contract, and the requirements for the preservation of goods.

A. Passing of Risk

The CISG sets forth the basic principle for the passing of risk in Article 67.[667] A pivotal issue
for determining risk is whether the contract requires the seller to hand over the goods. If the seller
is not bound to hand over the goods at a particular place, the risk passes to the buyer when the goods
are handed over to the first carrier for transmission to the buyer.[668] If, however, the seller is
bound to hand over the goods to a carrier at a particular place, the risk does not pass to the buyer
until the goods are handed over to the carrier at that place.[669] In any event, risk of loss does
not pass to the buyer until the goods are clearly identified in the contract. [670] Identification can
be demonstrated by markings on the goods, shipping documents, notice to the buyer, or other
appropriate means.[671][page 408]

Courts interpreting Article 67 have focused on two issues. The first issue pertains to the
consequences of damage or deterioration to goods after they are handed over to the carrier. A
number of courts have considered the liability of buyers and sellers in this context. A second issue
regards the effect of additional contract terms on the application of Article 67. When risk of loss
passes to the buyer pursuant to Article 67, the seller is not responsible for any deterioration or
damage to the goods. In B.P. Oil International, Ltd. v. Empresa Estatal Petroleos De Ecuador,
[672] the buyer refused to accept delivery claiming that the goods did not conform to the contract
specifications.[673] The contract provided that the goods were to be delivered "CFR" and
undergo a pre-shipment inspection for conformity.[674] The U.S. Fifth Circuit Court of Appeals
found that the goods should have been tested for conformity before risk of loss passed to the buyer
at the port of shipment.[675] The court also stated that the general principle in the event of
subsequent damage or loss was that the buyer must first seek a remedy against the carrier or insurer.
[676]

Issues of the application of Article 67 often hinge on a court's interpretation of contract terms that
impact the passage of risk of loss. In one case, a French seller sold goods to a German buyer
pursuant to a contract with a clause that it would deliver the goods to a carrier in accordance with
its general business conditions of "free delivery, duty-paid, [page 409] untaxed."[677] The
dispute arose after the buyer denied that delivery had taken place, even after the seller produced an
unsigned receipt with the buyer's stamp.[678] The court held that the clause "free delivery ..."
should be interpreted under German law. As such, the seller bore the risk for transportation of the
goods.[679] Moreover, the parties' past course of dealings included the seller using its own
means of transportation to deliver to the buyer. The court found this to be additional evidence of the
parties' intention to pass the risk to the buyer's place of business in Germany. Because the seller was
unable to prove that the goods were delivered to the buyer, no passing of risk to the buyer took place,
and the seller was not entitled to claim the purchase price.[680] It should be noted that when the
risk of loss passes to the buyer pursuant to Article 67, the risk passes irrespective of whether the
contract contains a C & F clause [681] or whether the buyer has arranged to insure the goods
while they are being transported.[682]

B. Fundamental and Anticipatory Breach

Essential to a determination of the liability of buyers and sellers is whether there has been a
fundamental breach or anticipatory breach of contract. Under Article 25, a fundamental breach of
contract occurs when an act by one of the parties results in the other party being substantially
deprived of what it expected under the contract.[683] However, the detriment caused by the
breach must have been foreseeable. If the breaching party did not foresee, and a reasonable person
in the same circumstances would not have foreseen such a result, there is no fundamental breach.
[684] A fundamental breach gives the non-breaching party the right to avoid the contract or to
require the delivery of substitute goods.[685] If the breach is [page 410] considered non-material, the aggrieved party is entitled to damages, but not the remedy of avoidance.[686]

The CISG provisions set a high threshold before a party anticipates a breach and can suspend
performance.[687] Anticipatory breach under Articles 71, 72, and 73 can occur in various
contexts in the performance of a contract.[688] These Articles aim to provide a remedy while
keeping the contract intact. A party may suspend the performance of his obligations if it becomes
apparent that the other party will not substantially perform because of a serious deficiency in its ability
to perform, such as poor creditworthiness, or in its failure to prepare to perform.[689] If these
preconditions exist, a party can suspend performance. Alternatively, if a seller has dispatched the
goods, he may prevent the goods from being handed over to the buyer.[690] Article 72 allows
the suspending party to terminate the contract by electing the remedy of avoidance.[691]

The narrowness of the preconditions for suspension of performance is designed to prevent abuse of
anticipatory breach. Another limitation on suspension of performance is that the party suspending
performance must immediately give notice of suspension to the other party.[692] "Reasonable
notice" to the other party enables the opportunity to provide adequate assurance of his performance.
[693] If a party declares that he will not perform his obligations, notice need not be given.
[694] Finally, a party's right to suspend performance is limited by the reciprocal right of the other
party to provide adequate assurance that it will perform. If the party provides such assurance, then
the party is prohibited from continuing the suspension.[695]

The final context in which the CISG addresses common obligations of [page 411] buyers and sellers
for anticipatory breach is Article 73. Article 73 provides the threshold for fundamental breach in the
context of installment contracts.[696] If one party's failure to perform any of his obligations
constitutes a fundamental breach of contract with respect to that installment, the other party may
declare the contract avoided only with respect to that installment.[697] However, if the failure
to perform with respect to one installment gives the non-breaching party reasonable grounds to
believe that the breaching party will not deliver a future installment, the anticipation of future
breaches equates to a fundamental breach allowing the non-breaching party to declare the contract
avoided.[698] The issues of fundamental breach as they pertain to installment contracts will be
explored more fully below in Part VI.B.2.

1. Fundamental Breach: Article 25

The concept of fundamental breach under Article 25 is very restrictive. A breach must concern the
essential content of the contract in order for it to be considered fundamental.[699] Courts and
arbitral decisions have focused on three types of breaches as potentially fundamental -- late delivery,
deficiencies in the goods, and failure to uphold specific contractual terms.

First, late delivery does not generally constitute a fundamental breach. [700] Similarly, there
cannot be a fundamental breach for failure to deliver where the parties have not agreed on a precise
date of delivery.[701] A buyer's refusal to take delivery of goods may also not be considered a
fundamental breach under certain circumstances. In one case involving staggered deliveries from May
to December, the parties agreed that in return for a price reduction, the September delivery would
take place in late August.[702] At the time of delivery, the buyer refused the goods and
demanded the delivery be postponed until September. A French court [page 412] determined that
the buyer did not commit a fundamental breach, because the buyer was entitled to regard the bringing
forward of the delivery date to late August as merely a reciprocal concession for a financial
advantage.[703] As such, it could not be expected to have understood that a few days' delay in
taking delivery would constitute a fundamental breach on its part. Accordingly, the seller should have
granted the buyer additional time in which to take delivery.

However, a delay in delivery can rise to a level of a fundamental breach when a timely delivery is in
the special interest of the buyer.[704] The importance of the delivery date must be foreseeable
at the time of the conclusion of the contract.[705] Depending on the circumstances of the
transaction, such as the need to honor obligations to downstream purchasers, the delivery time may
be considered a material term.

Second, a common type of breach is the delivery of deficient or defective goods or documents. In
a German case of non-conformity of documents, a buyer made alternative arguments of non-conforming delivery amounting to fundamental breach and non-conforming delivery amounting to
a non-delivery.[706] This case, popularly known as the "blue cobalt" case, involved a contract
that required the goods to be of British origin and accompanied by a certificate of origin. The seller
delivered the goods to a warehouse in Antwerp, as required by the contract, and sent certificates of
origin to the buyer. The certificates of origin indicated that the goods were of South African origin.
The buyer declared the contract avoided on the grounds that the non-conforming certificate
constituted a fundamental breach and that because of the defective document there was no true
delivery. The court rejected the buyer's Article 49(1)(b) (non-delivery) claim that the non-conforming
delivery was a non-delivery. The court reasoned that under the CISG, non-conforming delivery still
constitutes delivery, making Article 49(1)(b) not available to the buyer. The court also rejected the
buyer's avoidance claim under Article 49(1)(a) (fundamental breach) holding that it failed to prove
a fundamental breach. It asserted that the buyer failed to present evidence that South African cobalt
could not be sold or that the seller could not obtain conforming documents of origin. The later
assertion seems fanciful since the cobalt was clearly not of British origin. This case demonstrates that
the concept of fundamental breach is narrowly construed under the CISG.[707][page 413]

Third, defects are considered fundamental only when the buyer is substantially deprived of what he
was entitled to under the contract.[708] For example, tiles sold as "impermeable" which turned
out to be easily stained by household items, such as juice, constituted a fundamental breach of the
contract.[709] A shipment of jeans that contained the wrong quantity and were incorrectly
labeled with the wrong sizes fundamentally breached the contract.[710] In Delchi Carrier S.p.A.
v. Rotorex Corp., the Court of Appeals for the Second Circuit held that a fundamental breach of
contract occurred when air compressors did not conform to the sample model and the accompanying
specifications regarding cooling capacity and energy consumption.[711] However, the burden
remains on the buyer to prove that due to the non-conformity, the goods provided were substantially
below what was stipulated in the contract.[712]

Fundamental breach under Article 25 is not confined to untimely delivery or delivery of non-conforming goods. Under certain circumstances, any provision in a contract can be considered
material and the breach would be considered fundamental. For example, a French seller of jeans
negotiated a contract with an American buyer that specified that the ultimate destination of the goods
was to be either South America or Africa.[713] During the performance of the contract, the
buyer repeatedly ignored the seller's demand for proof of destination. Subsequently, the seller learned
that a shipment of the jeans was delivered in Spain. A French court found that the buyer disregarded
the seller's destination requirement and that this "attitude" constituted a fundamental breach of the
contract.[714]

Failure to abide by exclusivity provisions can also give rise to a fundamental breach under Article 25.
In one case, an Italian manufacturer agreed to produce shoes according to a German buyer's
specifications. At a trade fair, the seller displayed some of the shoes produced under the [page 414]
specifications, bearing a trademark of which the buyer was the licensee.[715] After the seller
refused to remove the shoes, the buyer avoided the contract. The court held that the seller's breach
of the ancillary duty of preserving exclusivity constituted a fundamental breach of the contract.
[716]

The concept of fundamental breach is also a determining factor in the context of anticipatory breach.
The CISG affords both buyers and sellers the right to suspend or avoid a contract due to a
fundamental breach under Articles 71-73.[717] If a fundamental breach occurs or is likely to
occur, the non-breaching party may seek to suspend performance under Article 71 or to avoid the
contract under Article 72. Although there is no bright-line standard for determining the degree of
certainty needed to anticipate fundamental breach, there should be a very high degree of probability
that the breach will occur.[718][page 415]

The installment contract requires a more complicated analysis. A breach of an installment must be
analyzed to determine if the breach is to be considered fundamental within the installment and the
contract as a whole. Article 73(1) implies that as a general rule, a breach of an installment
performance gives the other party the right to declare the contract avoided only with respect to the
installment.[719] If, however, it is determined to be fundamental to the whole, then the non-breaching party may avoid obligations in connection with future deliveries.[720] A stronger case
for fundamental breach is made when there are a series of defective installment performances. This
occurred in the Spanish case of T. SA v. E.[721] Here, the seller delivered three installments four
and eight weeks past the agreed upon dates, causing disruption to the buyer's production process.
The court ruled that avoidance was proper and canceled the remaining installments due under the
contract.[722]

In addition to fundamental breach, a second issue that often arises in connection with anticipatory
breach is the sufficiency of notice. In many instances, notice is improperly made or given too late.
It should be noted that consistent with Article 27, if any notice is made by "means appropriate in the
circumstances," a delay or error in the transmission of the communication or its failure to arrive does
not deprive that party of the right to rely on the communication.[723] Under Article 71, a party
suspending performance must "immediately" give notice of the suspension to the other party.
[724] Such notice is to be given as soon as the party makes the decision to suspend performance.
[725] For example, simply failing to pay the purchase price does not replace the notification that
payment of the purchase price is being suspended until the other party properly fulfills the contract
or [page 416] provides adequate assurance.

The importance of notice is a general theme found throughout the CISG.[726] It is particularly
evident in Article 71(2). Failure to give proper notice under Article 71(2) results in the revocation
of an otherwise reasonable suspension of performance. A German court held that reasonable doubts
about the buyer's creditworthiness were not sufficient to overcome the seller's failure to give notice
pursuant to Article 71(3).[727] The court reasoned that if the seller wanted to exercise his right
of suspension, he was obligated to inform the buyer about any doubts regarding her creditworthiness
or ability to perform her duties and liabilities under the sales contract. Inasmuch as the seller did not
demonstrate that he gave any such notice and information to the buyer, he was not permitted to
suspend performance. Hence, notification is an absolutely necessary prerequisite for exercising the
right of suspension for anticipatory breach.[728]

Proper notice must also be given for a party to avail itself of the avoidance provisions in Article 72,
except that the standard is slightly different.[729] Under Article 72, the party intending to declare
the contract avoided must give "reasonable notice" to the other party to allow that party the
opportunity to provide adequate assurance of performance.[730] The substance of the notice is
just as important as the timing; notice must be given prior to the date of performance.[731] After
the parties have performed the contract, neither party is entitled to declare the contract avoided under
Article 72.

C. Consequences of Breach

Upon breach by either party, a number of consequences result that are common to buyers and sellers.
The CISG provides a series of procedures that impact the consequences of breach. First, it provides
rules for the calculation of damages. Second, it provides a number of limiting doctrines [page 417]
that may be used to reduce the amount of damages awarded. Third, it provides the excuse of
impediment that allows the breaching party to avoid damages. Fourth, it provides rules for the
consequences of contractual avoidance. Finally, it allocates certain obligations pertaining to the
preservation of goods.

1. Calculation of Damages

Articles 74, 75, and 76 set out general formulas for the calculation of damages.[732] Pursuant
to Article 74, damages consist of a sum equal to the loss, including loss of profit, suffered by the
other party as a consequence of the breach.[733] Under Article 75, if the contract is avoided, and
the buyer has bought goods in replacement or the seller has resold the goods, the party claiming
damages may recover "the difference between the contract price and the price in the substitute
transaction."[734] The substitute transaction must be made in a reasonable manner and within
a reasonable time after avoidance.[735] If the substitute transaction occurs in a different place
from the original transaction or is on different terms, the amount of damages must be adjusted to
recognize any increase in costs, less any expenses saved as a consequence of the breach.[736]
Moreover, the time limit within which the resale or cover purchase must be made does not begin until
the injured party has in fact declared the contract avoided.[737] Failure to abide by the
requirements of Article 75 will result in a party being precluded from recovering damages.[738]
Consequently, the buyer who does not declare a [page 418] contract avoided is not entitled to
recover the expenses incurred in procuring replacement goods.[739]

If the contract has been avoided but no substitute transaction followed, then Article 76 sets forth an
alternative means of measuring damages. Article 76 provides that if the contract is avoided and there
is a current sale price for the goods, the party claiming damages may, if he has not made a purchase
or sale under Article 75, recover "the difference between the price fixed by the contract and the
current price at the time of avoidance."[740] If, however, the party claiming damages avoided
the contract after taking the goods, then the current price at the time of the taking over shall be
applied.[741] If no current price is presented in connection with a claim for damages under
Article 76, a party is precluded from recovering under this Article.[742] A party collecting under
Articles 75 and 76 may also recover additional damages under Article 74.[743]

A number of cases have dealt with the ability of the claiming party to recover interest. Generally,
interest is awarded for any claim of damages.[744] In fact, one arbitration tribunal awarded a rate
above the legal rate.[745] The rationale given was that the entitlement to interest under Article
78 is independent of any claim for damages under Article 74. The tribunal found that the seller
operated on the basis of credit for which it had to pay interest at the rate of 12%. It then applied that
rate since the seller would have to obtain credit in order to replace the funds missing due to non-payment by the buyer [page 419]

2. Limiting Doctrines: Articles 74 and 77

The damages available under Articles 74 and 75 are subject to the limiting doctrines of foreseeabilty,
found in Article 74, and the principle of mitigation, found in Article 77. Under Article 74, damages
"may not exceed the loss which the party in breach foresaw or ought to have foreseen at the time of
the conclusion of the contract," in light of the facts and matters of which he then knew or ought to
have known, as a possible consequence of the breach of contract.[746] A party may increase the
scope of foreseeability by communicating to the other party that a breach would cause him
exceptionally heavy losses or losses of an unusual nature.[747]

Issues arising under Article 74 fall into two major categories. First, there are cases addressing
whether or not certain damages are foreseeable. The burden of proof is on the non-breaching party
to prove that the damages were a foreseeable consequence of breach. Second, there is the issue of
whether attorneys' fees and the costs of debt collection are allowed under Article 74. Article 77 places
a duty on the non-breaching party to mitigate damages. A key determination in the application of the
doctrine of mitigation is the timing of the mitigation.

a. Doctrine of Foreseeability

The Supreme Court of Germany applied the foreseeability limitation at the time of contract formation,
rather than, as under national law, at the time of the breach.[748] In that case, the buyer was a
German cheese importer who entered into a contract to purchase cheese from a Dutch exporter.
Because three percent of the cheese delivered was defective, the buyer sought damages, including lost
profits as a result of the loss of four wholesale customers, damages paid to one of buyer's customers
who lost his own customers as a result of the defective cheese, and the loss of a group delivery
arrangement causing an increase in the buyer's transportation costs.[749] Two lower courts
denied the buyer's claims, stating that he could only recover lost profits if the seller could have
foreseen such damages [page 420] because 3% of the cheese was defective. The German Supreme Court
reversed and remanded noting that the seller knew at the time of the formation of the contract that
the buyer was a middleman or reseller of the goods.

In Delchi Carrier S.p.A. v. Rotorex Corp.,[750] the Court of Appeals for the Second Circuit
emphasized that the CISG requires damages to be limited by the "familiar principle of foreseeability
established in Hadley v. Baxendale."[751] Accordingly, the court found that a CISG plaintiff may
collect damages to compensate for the full loss, including lost profits, "subject only to the familiar
limitation that the breaching party must have foreseen, or should have foreseen, the loss as a probable
consequence."[752] The court held that damages were foreseeable and could be recovered for
lost profits due to lost sales from having to shut down manufacturing operations, along with expenses
for storage, shipping and retooling.[753] In so holding, the court stated that to award damages
for such costs actually incurred in no way creates a double recovery and instead furthers the purpose
of giving the injured party damages "equal to the loss" as provided for by Article 74.[754]

As demonstrated in Delchi Carrier S.p.A. v. Rotorex Corp., the general principle that there should
be "full compensation" for damages under the CISG not only allows for recovery of lost profits, but
also additional out of pocket expenses.[755] Damages have been awarded for a variety of
expenses including costs of obtaining credit,[756] damages caused by liability to a customer when
goods are sold to a dealer who intends to resell them,[757] and damages for the costs relating to
a dishonored check.[758] Damages were not awarded where they were not reasonably
foreseeable and damages have been denied where the party seeking damages fails to do the following:
[page 421] prove that additional costs of obtaining goods were foreseeable at the time the contract
was concluded; [759] where the buyer was forewarned by complaints concerning an initial
delivery, but still failed to carefully examine a second shipment for defects in a timely manner;
[760] where the buyer lost profits associated with general distribution agreement with other
parties; [761] where the buyer failed to state a claim for damages within a reasonable time;
[762] where a party sought compensation for impairment to its "trading image"; [763] where
the buyer claiming damages failed to specify the nature of the lack of conformity of the goods;
[764] and where the buyer did not produce any evidence that the seller knew about the terms and
conditions of a contract between the buyer and a third party.[765]

b. Attorney Fees and Debt Collection

A second major issue under Article 74 is whether attorneys' fees are recoverable.[766] Authority
is split on this point. German courts have required parties to pay attorneys' fees under Article 74.
[767] Recently, a German district court held that the buyer was responsible to pay the seller's
attorneys' fee incurred as a result of the buyer's failure to pay in a timely manner, plus interest accrued
since the commencement of the legal action.[768] In the United States, however, the Court of
Appeals for the Seventh Circuit held in Zapata Hermanos Sucesores v. Hearthside Baking Co. that
the loss recoverable in Article 74 does not include attorneys' fees.[769] In reaching this
conclusion, Judge Posner noted that there was [page 422] nothing in the background of the CISG
about whether "loss" was intended to include attorneys' fees.[770] In Ajax Tool Works, Inc. v.
Can-Eng Manufacturing Ltd.,[771] the Federal District Court for the Northern District of Illinois
held that since the granting of "attorneys' fees [is] a procedural matter governed by the law of the
forum," they are not recoverable in the United States under Article 74.[772]

In the related area of debt collection, a German court held that debt collection costs are not
recoverable under Article 74.[773] The court, however, did not totally exclude the possibility
of recovering the costs associated with debt collection. It rejected the claim because it found that the
plaintiff failed to follow the most economical means to collect the debt.[774] In another case, a
Swiss court held that the buyer had to indemnify the seller for debt collection costs.[775] The
seller was awarded default interest and reimbursement of debt collection costs.

c. Doctrine of Mitigation

In accordance with Article 77, a party who is subject to a breach of contract must take "such
measures as are reasonable in the circumstances to mitigate the loss, including loss of profit, resulting
from the breach."[776] If a party fails to take measures to mitigate damages, the party in breach
may claim a reduction in damages in the amount by which the loss should have been mitigated.
[777] The duty to mitigate damages also applies to an anticipatory breach of contract.[778]

The timing of the non-breaching party's mitigation efforts is crucial to the ultimate calculation of
damages owed. A party is not required to mitigate before the date of avoidance. However,
mitigation must take place [page 423] within a reasonable time. The reasonable time standard
provides the flexibility needed to consider a wide range of divergent fact patterns. For example, a
two-month timeframe for mitigation would be deemed, under most circumstances, to be
unreasonable. In a case involving the sale of winter shoes, one court held that resale nearly two
months after avoidance was within a reasonable time frame, especially in light of the fact that most
retailers had already filled their winter orders by the date of the avoidance.[779]

In mitigating its loss, a party obligated to resell goods should make reasonable efforts to undertake
a profitable resale.[780] Examples of failure to mitigate include only making efforts to effect
replacement purchases in the buyer's region, without taking into account other suppliers in the
country or abroad,[781] and failure to make a covering purchase after the seller terminated a
contract with respect to non-delivered goods.[782]

3. Impediment (Excuse) to Performance: Article 79

A buyer may still be barred from recovering foreseeable damages if the defendant seller can prove that
non-performance was due to an impediment. Under Article 79, a party will not be held liable for
failure to perform his contractual obligations if he proves that "the failure was due to an impediment
beyond his control" and that he could not reasonably be expected to have taken the impediment into
account at the time of the conclusion of the contract or to have avoided or overcome it or its
consequences.[783] A party may also be excused from performance, under limited circumstances,
if the failure to perform is due to the failure of a third person.[784] As is the case with avoidance,
a party who fails to perform because of an impediment must provide notice to the other party within
a "reasonable time" after the party who fails to perform knew or ought to have known of the
impediment.[785] If the other party does not receive such notice, then the party who fails to
perform will be liable for damages that could have been avoided if proper notice had been given.
[786]

To be excused, the circumstances constituting the impediment must be [page 424] beyond the party's
control.[787] The burden of proof is on the non-performing party to prove the circumstances
entitling it to an excuse from liability.[788] For example, a seller who fully performed his
obligations under the contract, then placed the goods in the hands of a carrier, was not held liable for
the carrier's failure to deliver on time.[789]

As a general rule, however, national courts are not inclined to excuse a party for an impediment to
performance.[790] A party cannot rely on the exemption merely on the ground that performance
has become unforeseeably more difficult or unprofitable.[791] For example, in International
Chamber of Commerce Case 6281 of 1989,[792] an arbitration panel held that a seller could not
be relieved of the obligation to deliver the goods at the contract price due to a change in the market
price. It reasoned that the increase in the market price was neither sudden nor unforeseeable.
[793] In another case involving the sale of defective powdered milk, the German Supreme Court
held that the seller could only be freed from its obligation to pay damages by proving that the
infestation of the delivered milk could not have been detected and that the probable source of
infestation was outside of its sphere of influence.[794]

Other circumstances where parties were not granted an excuse under Article 79 include the buyer's
inability to obtain foreign currency,[795] "hardship" caused by an almost 30% increase in the cost
of goods,[796][page 425] inability to deliver the goods because of an emergency production
stoppage,[797] and financial difficulties of the seller's main supplier.[798] In cases of
shortage, a seller can only claim impediment if goods of an equal or similar quality are no longer
available on the market. In the case of price fluctuations, the seller is allocated the risk of increasing
market prices at the time of the substitute transaction. As is evidenced by these representative cases,
a high standard is set for a party to successfully claim excuse due to impediment.

4. Effects of Avoidance: Articles 81-84

The effects of avoidance are set forth in Articles 81, 83, and 84. [799] Avoidance of the contract
releases both parties from their obligations subject to any damages attributed to them.[800]
Additionally, a party who has wholly or partially performed the contract may claim restitution from
the other party consisting of whatever has been paid or supplied under the contract.[801] Articles
83 and 84 also contain provisions setting forth specific [page 426] rights and liabilities of buyers and sellers.
For example, if it is impossible to return the goods in the same condition in which the buyer received
them, a buyer is not entitled to avoid the contract.[802] A buyer who has lost the right to declare
the contract avoided or to require the seller to deliver substitute goods in accordance with Article 82
retains all other remedies set forth in the contract and under the provisions of the CISG.[803]

As discussed in the coverage of notice of non-conformity,[804] a party must declare a contract
avoided in a timely fashion. This duty of timely avoidance can be implied from Article 49's language
that the non-breaching party must declare avoidance "within a reasonable time."[805] A German
court looked to the general principles of the CISG in fashioning the principle of timely avoidance.
It held that a plaintiff's attempt to declare a contract avoided after 2 years was a violation of the
principle of good faith contained in Article 7(1) CISG.[806]

Under Article 83, the loss of the right to declare the contract avoided or to require the seller to
deliver substitute goods does not deprive the buyer of the right to claim damages, to require that any
defects be cured, or to declare a reduction in price.[807] In addition, Article 84 states that if the
seller is required to refund the price "he must also pay interest from the date on which the price was
paid."[808] Despite this reference to the payment of interest, the CISG does not specify how the
applicable interest rate is to be determined.[809] A Swiss court offered a reasonable answer by
holding the rate of interest the seller had to pay was determined on the basis of the prevailing rate of
interest at the seller's place of business.[810]

5. Preservation of Goods: Articles 87 and 88

This section addresses the requirement for the preservation of goods dictated under Articles 87 and
88. The general rule is that a party who is [page 427] bound to take steps to preserve the goods may
deposit them in a warehouse of a third person at the expense of the other party provided that the
expense incurred is not unreasonable.[811] Articles 87 and 88 provide for the preservation of
goods when there is some instance of delay.[812] Failure to appropriately store or to sell goods
can affect the amount of damages a party will be awarded.[813] For example, a buyer was held
not liable for the full amount of goods after the seller, who was storing the goods, gave some of the
goods to charity and the remainder were spoiled.[814] In general, the requirement in Article 87
that a party who is under an obligation to preserve the goods by depositing them in the warehouse
of a third party is intended to be interpreted broadly to mean any appropriate place for the storage
of the type of goods in question.[815]

A party who is bound to preserve the goods in accordance with Article 85 or 86 may sell them by
"any appropriate means" if there is an unreasonable delay in the other party re-taking possession of
the goods, or in paying the price, as long as reasonable notice of the intention to sell is given to the
other party.[816] If, however, the goods are subject to rapid deterioration or their preservation
would involve unreasonable expense, a party who is bound to preserve them must take reasonable
measures to sell them.[817] The party selling the goods has the right to retain from the proceeds
of sale an amount equal to the reasonable expenses incurred to preserve and sell the goods.[818]

Under Article 88, the sale of goods may be by "any appropriate means" if there has been an
unreasonable delay by the other party in taking possession.[819] Unfortunately, the CISG does
not specify what constitutes "appropriate means." Appropriate means can vary depending on the
[page 428] conditions in the country. As a result, reference should be made to the means required
for sales in similar circumstances under the law of the country where the sale occurs.[820] The
resale of goods is especially important when the goods are subject to rapid deterioration.[821]
Moreover, the concept of loss is not limited to the physical deterioration of the goods.[822] It
also includes situations in which the goods threaten to decline rapidly in value due to market changes.
[823]

We believe that CISG jurisprudence has done more good than harm in removing legal obstacles to
international trade. It has helped to overcome what Franco Ferrari has called the problem of
"nationality of law."[824] Although it has not yet attained critical mass, CISG jurisprudence has
grown significantly. As it has grown, greater uniformity of application has been evidenced. One
commentator predicts that "[a]s more case law and commentary on the Convention develops, courts
will apply the Convention with more regularity ... . This will bring more predictability in international
sales law."[825]

This Part will make observations taken from the analysis presented in the earlier Parts of this article.
These observations show that existing jurisprudence has already witnessed the coalescence or
regularity of opinion pertaining to the development of specific default rules to fill in gaps in the CISG.
These gaps are a result of both the vagueness in wording of many express CISG provisions and lack
of express provisions in areas arguably within the scope of the CISG. Coverage of the "developing
jurisprudence," in Section A below, more specifically discusses the importance of notice, trade usage,
and particularized consent in CISG jurisprudence. Finally, it examines how courts have had to
develop rules due to the CISG's failure to expressly allocate the burden of proof. This Part concludes
with a note of caution represented by the persistence of [page 429] homeward trend analysis found
in too many CISG decisions.

A. Developing an International Jurisprudence

In cases where the CISG fails to provide a specific default rule, courts have been tempted to apply
the default rule provided under their domestic laws. The better reasoned cases have taken the
"international character" mandate of Article 7 seriously. They have explored foreign cases dealing
with gaps in the CISG. In addition, in cases where CISG general principles or analogical reasoning
have failed to provide a solution the better reasoned cases have avoided the hasty application of the
local default rule in favor of an analysis of the default rules of various countries.[826] This
approach is aligned with the mandate of "international character." An example of this is the Italian
case of Sport d'Hiver Genevieve Cutlet v. Ets. Louys et Fils, in which the court reviewed both
German and Swiss law to determine the reasonableness of a notice of non-conformity.[827] The
court pointed out that the notice provision of CISG Article 39 is "intentionally elastic ... in terms
of reasonableness, so that the degree of flexibility will be evaluated in accordance with the
practicalities of each case."[828] It found that a notice sent 23 days after delivery for defects that
were apparent was unreasonable under Swiss and German law and therefore under the CISG.
[829]

A Swiss court in trying to determine a "reasonable time"[830] for sending a notice of non-conformity, recognized the divergent views of prompt notice in different legal systems. It noted that

"the calculation of the time limit to give a notice of defect varies. Whereas jurisdictions of the
Germanic legal family demand an immediate notice ...in Anglo-American and Dutch law the
notification ...of defect given several months after discovery of the defect is deemed to be within
an appropriate time limit."[831]

The court then fabricated a one-month limit to giving notice as a compromise between the divergent
views. It then reasoned that it was necessary to narrow this gap when interpreting Article 39 of the
CISG.[832] "To avoid too wide a gap in interpretation, a convergence of those points of view
seems inevitable. Therefore, an approximate medium time frame of at [page 430] least one month seems
appropriate."[833] The court, in essence, fabricated a specific default rule of one month under
Article 39's general default rule of giving prompt notice. However, this is not an inflexible, bright line
rule. The court also lists a number of factors that impact the reasonableness of the one-month rule,
including that the one-month rule is to be adjusted upward or downward depending upon the mix of
the enunciated factors.[834]

1. Filling in the Gaps and the Fabrication of Specific Default Rules

The open-ended nature of CISG default rules has expectedly produced divergent interpretations. The
interpretations that are a product of reasoned analysis within the framework of the CISG's interpretive
methodology will hopefully be given persuasive effect. The issue of gaps presents special problems
for the interpreter. A true gap is an issue not contemplated by the drafters. This was the case in
Usinor Industeel v. Leeco Steel Products, Inc.[835] in which a U.S. District Court was
confronted with a case of first impression. The case involved a French seller and an American buyer.
The American buyer secured a loan and provided the American bank with a security interest in the
goods. The issue was whether a claim of a third party could preclude CISG jurisdiction.[836]
The CISG provides for jurisdiction when two parties to a contract are from different signatory
countries.[837] It does not deal directly with the issue of whether that jurisdiction is affected
when a third party with a security interest in the goods enters the litigation. The American court cited
an Australian case on the validity of retention of title clauses. In doing so it correctly recognized that
"commentators on the CISG have noted that courts should consider the decisions issued by foreign
courts on the CISG."[838] The case hinged upon the court's interpretation of Article 4(b) of the
CISG which states that the CISG does not cover "the effect which the contract may have on property
in the goods sold."[839] The Buyer argued that Article 4(b) implies that security interests of third
parties are covered under domestic law. The Seller argued that the Article 4(b) exclusion pertains
only to property interests occurring prior to the sale. The court cited scholarly commentary in
rejecting the Seller's argument. [840] Thus, the Seller could not obtain avoidance of the [page
431] contract and retake possession of the goods because the bank had a perfected security interest
under domestic law.

As discussed in the previous section, courts have, when necessary, grafted specific default rules on
to the CISG in order to make its express default rules functional. These specific default rules allow
for the uniform handling of categories of similar cases. For example, Article 38 makes it the buyer's
duty to inspect delivered goods. It fails to express a standard for an adequate inspection. In
response, courts have provided parameters for a legally adequate inspection through the development
of specific default rules.[841]

2. Particularized Express Consent

Some courts have refused to enforce derogation from CISG rules without proof of particularized
express consent. Article 6 states that "parties may exclude the application of the Convention or
derogate from or vary the effect of any of its provisions."[842] However, excluding or varying
the application of a CISG provision may require more than inserting an express term in the written
contract. The importance of particularized consent was discussed in Part III.A's (writing
requirements) and Part III.B.3's coverage of the acceptance rules of Article 18. Parties are free to
derogate from Article 11 and require that any contracts or modifications are enforceable only when
concluded in writing. However, an Austrian court rejected such a derogation from Article 11's no
writing requirement when it failed to enforce a writing requirement clause inserted into a standard
form contract.[843] It held that such a writing requirement is only enforceable if the non-derogating party gives informed assent.[844]

The need for express consent in standard form contracting is an example of a domestic gloss
interpretation of the CISG. As discussed in Part III.B.3, the CISG does not specifically address the
enforceability of standard terms or what is necessary to validly incorporate them into a contract. The
courts that have required the non-inserting party to be aware of the terms and their meanings are
those of civil law countries. The civil law legal systems have emphasized that a party must be
reasonably aware of the terms the other seeks to incorporate.[845] In contrast, American law
[page 432] does not distinguish between dickered and standard or boilerplate terms. Also, American
law more narrowly polices abuse through the application of the doctrine of unconscionability,
primarily in consumer and not commercial contracts.

3. Importance of Trade Usage in CISG Rule Application

Articles 8 and 9 recognize the importance of trade usage in the interpretation of CISG contracts.
Article 8(3) notes that in determining the parties' intent, due consideration is to be given to "usage."
Article 9(2) states that the parties are bound by "a usage ... which in international trade is widely
known to, and regularly observed by, parties to contracts of the type involved in the particular trade
concerned."[846] The role of trade usage is a general principle that affects the application of
many of the CISG's provisions. For example, national courts have excused untimely notice when a
defect could only have been discovered through an inspection that is not customary in the trade
concerned. As previously discussed in Part III.B.3, the courts are split in their views as to the
applicability of trade usage under the CISG. The conservative view holds that a trade usage must
have a distinct international character to be considered while the liberal view allows for the admission
of local trade usage.

An innovative trade usage to fill in a gap in the CISG is in the area of Article 84's obligation to pay
interest. It states that the seller must pay interest on price refunds.[847] However, it fails to
mention any buyer's obligation to pay interest for non-payment or how the interest is to be calculated.
It can be argued that its statement on interest brings the issue within the scope of the CISG. An
Argentine court resorted to the concept of trade usage to fill in the gaps. "[N]otwithstanding the fact
that CISG contains no express provision recognizing the payment of interest [by the buyer], [i]t was
considered that payment of interest was a widely known usage in international trade."[848]

In a more sweeping acceptance of international trade usage, the court in St. Paul Insurance Co. v.
Neuromed Medical Systems implied INCOTERMS into the CISG through Article 9(2).[849] It
correctly avoided the temptation of finding that trade terms were not within the scope of the CISG
and then applied the trade terms found in the UCC.[850] Instead, the court found that many trade
terms issues were within the scope of the [page 433] CISG. It based that decision on the transfer of
risk provision found in Article 67(1). It then held that "INCOTERMS are incorporated into the CISG
through Article 9(2)."[851] Although this was an easy decision given the universal recognition
of INCOTERMS, it is still significant because it was handed down by an American court.
Furthermore, the court references German law and case precedent as well as scholarly writings on
the CISG.[852] More importantly, it recognized the importance of uniformity in interpreting the
CISG by using the appropriate interpretive methodology. It states that "interpretations [should be]
grounded in its underlying principles rather than in specific national conventions." [853] This is
a clear rejection of the homeward trend bias.

The potential use and misuse of trade usage was also demonstrated in a Swiss court decision.
[854] The court used Articles 9(1) (inter-party usage) and 9(2) (international trade usage) to
recognize the binding nature of a written confirmation. It creatively argued that the parties "knew
or ought to have known the binding nature of such confirmations under both Austrian and Swiss
law."[855] The court asserted that due to that knowledge, and that there was no other practice
prevailing in the particular trade, the binding nature of a confirmation was a usage under both Articles
9(1) and 9(2).[856] Although, the court was correct in recognizing the binding nature of
confirmations as a general trade usage, it is a dangerous precedent to use domestic law as a vehicle
in establishing an international trade usage.

The above case and a decision of an Austrian court illustrate how the problem of homeward trend
can present itself in various ways.[857] These cases demonstrate that homeward trend bias can
influence the recognition of trade usage. An Austrian court held that Article 9(2) "could not be
interpreted as barring the application of national or local usage in interpreting a contract."[858]
This is a contradiction of Article 9(2)'s requirement that any such usage be widely known in
international trade. The court's decision is reconcilable with the express mandate in Article 9(2) given
the court's emphasis on the fact that the seller had done business in the country of the local usage for
many years and, thus, could not have been unaware of the usage. Instead of declaring national and
local usages to be generally applicable, the court should have crafted an exception based [page 434]
upon the facts of the case. In short, a more specific default rule would have made local usage
available to the court if the adverse party knew of its existence and knew there was no conflicting
international usage.

4. Importance of Notice

One element that runs throughout the CISG is the importance of notice. Notice is expressly
mandated in the following CISG provisions: notice of objection to additional terms (Article 19),
notice of acceptance of a belated acceptance (Article 21), notice of avoidance (Article 26, 49),
sufficiency of notice (Article 27), notice of consignment (Article 32), notice of non-conformity and
sufficiency of notice of non-conformity(Article 39), notice of third party claims (Article 43), notice
of demand for substituted goods (Article 46), notice of time extension (Articles 47, 48, 63), notice
of specifications (Article 65), notice of delivery (Article 67), and notice of intention to sell (Article
88). Failure to communicate to the other party on numerous issues (including avoidance, suspension,
fundamental breach, and non-conformity) meets with dire consequence. As discussed in Part VI.B.2,
insufficiency of notice, either "improperly made or given too late,"[859] results in the loss of a
right to declare an anticipatory breach or right to avoidance under Articles 71-73. Article 79 removes
the liability exemption for a party declaring avoidance if it fails to notify the other party within a
reasonable time after it knew or ought to have known of the impediment.[860]

Given the pervasiveness of notice requirements, an implied general principle of communication to the
other party may be recognized. Awareness of the importance of communication or notice, whether
extrapolated from first order principles of good faith or commercial reasonableness, is vital to the
international trade of goods. It is likely that courts will imply notice requirements in situations not
expressly mandated by the CISG. An example of an implied notice requirement was discussed in Part
V.C.3. A German court denied the buyer the right to avoidance because the declaration of avoidance
occurred five months after the breach.[861] While Article 49(1)(b) does not explicitly require
notice of avoidance within a reasonable time, the court construed the general theme of the CISG's
"Section on Remedies for Breach of Contract by Seller" to require reasonably prompt notice.
[862]

5. Burden of Proof

Generally, the CISG does not expressly provide rules on which party [page 435] has the burden of
proof for different issues of fact.[863] A court's allocation of the burden of proof becomes as
important as the substantive rule itself. That allocation often shifts within the dictates of a single
Article. For example, Article 2 excludes from the reach of the CISG sales of goods bought for
"personal use."[864] The party seeking to enforce the exclusion has the burden of proving that
the goods were purchased for personal use. It also provides that the exclusion does not affix to the
transaction if the seller "neither knew nor ought to have known that the goods were bought for any
such use."[865] In submitting such a claim, the other party would have to satisfy the burden of
proof.

If a rule or issue is within the scope of the CISG, then the allocation of the burden of proof should
be determined through the interpretive methodology of the CISG. An Italian court in Rheinland
Versicherungen v. Atlarex concluded that an underlying principle of the CISG is that the party that
benefits from a finding has the burden of proving it.[866] The case is an example of a court
totally committed to the quest for uniformity through the application of the CISG's interpretive
methodology. First, it determined that the issue of the burden of proof is within the scope of the
CISG. Second, it performed a comprehensive review of foreign case law to see if decisions on the
issue of burden of proof provide persuasive rationales. The court refers to approximately forty
foreign cases and arbitral decisions.[867]

Third, the Court concluded that since there was no express provision allocating the burden of proof
in Articles 38 and 39 regarding inspection and notice of non-conformity the allocation was to be
determined through the application of CISG general principles. The Court found an implicit general
principle in Article 79(1)'s placement of the burden of proof on the party claiming an impediment.
It then reasoned that Article 79(1)'s allocation brought the issue of the burden of proof within the
scope of the [page 436] CISG.[868] Based upon the Article 79(1) allocation it further reasoned
that the implied general principle is that the burden of proof is on the party who would benefit from
the evidentiary finding. It stated that the "Convention's general principle on the burden of proof
seems to be ei incumbit probation qui dicit, non qui negat: The burden of proof rests upon the one
who affirms, not the one who denies."[869] This is how a Swiss court rationalized the placement
of the burden of proof for a party seeking an excuse for a delayed inspection of goods. It held that
buyers seeking such additional time should bear the burden of proof with respect to the reasons
justifying such additional time.[870]

B. Persistence of Homeward Trend

Despite the existence of enlightened decision-making by courts and arbitral panels using CISG
interpretive methodology, the persistence of homeward trend remains a problem. We have seen that
some areas, such as the battle of forms, are particularly subject to homeward trend interpretations.
[871] This is likely due to the vagueness and open-endedness of CISG language. An example is
the U.S. Court of Appeals for the Fifth Circuit's decision that the parol evidence rule applied to cases
of written contracts within the scope of CISG jurisprudence because of its nature as a rule of
procedure and not of substantive law.[872] This is an example of judicial parochialism. The
court failed to use CISG interpretive methodology. A reasoned analysis would have involved the
court's [page 437] recognition of a general principle that, under the CISG, legal formalities are not
to be used to preclude admission of relevant evidence. First, Article 11 states that a contract "need
not be evidenced by a writing" and that "it may be proved by any means, including witnesses."
[873] Article 8(3) states that "due consideration is to be given to all relevant circumstances of the
case including negotiations."[874] Nonetheless, the court applied the Texas parol evidence rule
to a case involving the CISG. It did so without a review of foreign case law and scholarly
commentary.[875]

In comparison, the U.S. Court of Appeals for the Eleventh Circuit in MCC-Marble Center rejected
the homeward trend temptation and correctly held that the admissibility of parol evidence was a rule
of substantive law and within the scope of the CISG.[876] In addition, the court appropriately
cited scholarly writings and foreign case law to buttress its holding. In doing so, it recognized an
implied general principle that:

"the CISG was to provide parties to international contracts for the sale of goods with some
degree of certainty as to the principles of law that would govern potential disputes. Courts
applying the CISG cannot, therefore, upset the parties' reliance on the Convention by substituting
familiar principles of domestic law."[877]

It also refers to the express general principles of freedom of contract by holding that the parties could
adopt the parol evidence rule by inserting a merger clause into their contracts.[878]

More recently the U.S. Court of Appeals for the Fourth Circuit in Schmitz-Werke GmbH v. Rockland
Industries, Inc. badly misapplied CISG's interpretive methodology.[879] It placed domestic
jurisprudence on a non-hierarchical level with the express language of the CISG and its general
principles. It nonchalantly states that "[c]ase law interpreting provisions of Article 2 of the Uniform
Commercial Code that are similar to provisions in the CISG can also be helpful in interpreting the
Convention."[880] The court correctly notes that recourse to domestic law is a matter of last
resort. It then, however, argues that the CISG is silent as to the type of evidence [page 438] needed
to prove a breach of an express warranty. The important question is not whether the CISG is silent
as to the nature of the buyer's burden of proof but whether the issue is within the scope of the CISG.
Given Article 35's warranty coverage, the issue of how a party proves non-conformity is within the
scope of the CISG. Instead of devolving to UCC law, the court should have based its answer upon
general principles and by reviewing foreign case law interpreting Article 35.

There are signs that U.S. courts are becoming more sophisticated in their applications of the CISG.
[881] The references in MCC-Marble Center to international authorities and cases are aligned
with Article 7's mandate that decisions should be based on due considerations of international
character and the need for uniformity. This mindset was again on display in the U.S. Eastern District
Court of Louisiana case of Med. Mktg. Int'l. v. Internazionale Medico Scientifica S.r.l..[882]
The issue in that case was the role of public regulations on the seller's warranty obligations under
Article 35(2).[883] The drafters of the CISG did not consider the role of governmental standards
and regulations on the merchantability of goods.[884]

In reviewing a foreign arbitration award, the American court recited the German case reviewed in the
arbitral decision and treated it as a persuasive precedent.[885] The German Supreme Court held
that the general rule was that a seller was not obligated to supply goods that conform to the laws of
the buyer's country. The American court agreed with the arbitral decision that the case at bar came
within an exception, namely, that the seller was obligated to provide goods that conform to foreign
regulations "if due to 'special circumstances,' such as the existence of a seller's branch office in the
buyer's state, the seller knew or should have known about the regulations at issue."[886] This
case, along with the German and Austrian cases discussed in Part V, interpreting the warranty
provisions of Article 35 provide an example of the proper application of CISG interpretive
methodology to resist homeward trend decisions.[887][page 439]

A review of CISG jurisprudence is an enlightening experience in the creation and interpretation of
a living commercial code. The extremes that are found in the national interpretation of any
international convention are evidenced in CISG jurisprudence. At one extreme, some courts have
largely ignored the CISG's mandate that interpretations are to be formulated with an eye toward the
international character of the transaction and the need for uniformity of application. At the other
extreme are courts, and more often arbitral panels, that have taken the above mandates seriously and
have resisted the temptation of homeward trend interpretations. In the middle, are the majority of
cases that have attempted to provide autonomous interpretations with various degrees of success.

Despite the problem of diverging interpretations, there are signs that courts are taking their role in
applying CISG interpretive methodology more seriously. The result has produced a coalescing of
different interpretations through the formulation of more specific default rules and the recognition
of factors to be used in applying CISG articles. In the end, poorly reasoned interpretations will
hopefully be largely ignored. This coalescence of jurisprudence is evidence that the CISG is evolving
as a living, functional code. It is this process of evolution that allows us to conclude that the CISG
has obtained a significant degree of success in reducing legal impediments to international sales
transactions. For even in case of divergence, a certain level of uniformity is achieved in comparison
to the realm of private international law. It is the hope that this process will create a more uniform
jurisprudence in the years to come. [page 440]

4. United Nations Convention on Contracts for the International Sale of Goods, April 11, 1980,
1489 U.N.T.S. 3, 19 I.L.M. 671, available at Pace Law School Institute of International Commerce
Law, <http://cisgw3.law.pace.edu> (last updated Sept. 2003) (hereinafter CISG). The CISG was
incorporated into the law of the United States on January 1, 1988. See generally E. Allan Farnsworth, The Vienna Convention: History and Scope, 18 Int'l Law. 17 (1984); John O. Honnold, Documentary History Of The Uniform Law For International Sales (1989) (hereinafter, Honnold, Documentary History). The CISG officially went into force on January 1, 1988. As of March 20, 2003, 62 countries had acceded to the CISG. See UNICTRAL at <http://www.uncitral.org/english/status/status-e.htm>. The counties that have ratified the CISG, in
alphabetical order, are: Argentina, Australia, Austria, Belarus, Belgium, Bosnia-Herzegovina,
Bulgaria, Burundi, Canada, Chile, Colombia, Croatia, Cuba, Czech Republic, Denmark, Ecuador,
Egypt, Estonia, Finland, France, Georgia, Germany, Ghana, Greece, Guinea, Honduras, Hungary,
Iceland, Iraq, Israel, Italy, Kyrgyzstan, Latvia, Lesotho, Lithuania, Luxembourg, Mauritania, Mexico,
Mongolia, Netherlands, New Zealand, Norway, Peru, Poland, Moldova, Romania, Russian
Federation, Saint Vincent & the Grenadines, Serbia & Montenegro, Singapore, Slovakia, Slovenia,
Spain, Sweden, Switzerland, Syria, Uganda, Ukraine, United States, Uruguay, Uzbekistan,
Venezuela, and Zambia. Notable exceptions include Brazil, Indonesia, India, Japan, Malaysia South
Korea, and the United Kingdom. In a 1990 article, Professor Farnsworth stated that the
internationalization of contract law and the adoption of the CISG was one of the "Top Ten"
developments in contract law during the 1980's. Regarding the CISG he states: "the 1980's saw the
internationalization of contract law -- a legislative event that was the culmination of an effort spanning
a half century." E. Allan Farnsworth, Developments in Contract Law During the 1980's: The Top Ten, 41 Case W. Res. L. Rev. 203, 204 (1990).

6. For a discussion of the problem of homeward trend see, Honnold, Documentary History, supra note 4. See also, Harry M. Flechtner, The Several Texts of the CISG in a Decentralized System: Observations on Translations, Reservations and Other Challenges to the Uniformity Principle
in Article 7(1), 17 J.L. & Com. 187 (1998) [available at <http://cisgw3.law.pace.edu/cisg/biblio/flecht1.html>]. "Perhaps the single most important source of non-uniformity in the CISG is the different background assumptions and conceptions that those charged
with interpreting and applying the Convention bring to the task." Id. at 200. One commentator
argues that homeward trend can be minimized if the CISG is re-titled, enacted as a piece of federal
legislation, and state law [UCC] expressly refers to it. See, James E. Bailey, Facing the Truth: Seeing the Convention on Contracts for the International Sale of Goods as an Obstacle to a Uniform Law on International Sales, 32 Cornell Int'l L.J. 273 (1999). The drafters of the CISG were aware and
concerned by the problems of homeward trend: "[I]t is especially important to avoid differing
constructions of the provisions of this Convention by national courts, each dependent upon the
concepts used in the legal system of the country of the forum." Guide to CISG, Secretariat
Commentary Article 7, available at <http://cisgw3.law.pace.edu/cisg/text/e-text-07.html>.

7. John E. Murray, Jr., The Neglect of CISG: A Workable Solution, 17 J.L & Com. 365, 367
(1998) [available at <http://cisgw3.law.pace.edu/cisg/biblio/murray1.html>]. See also V. Susanne Cook, The U.N. Convention on Contracts for the International Sale of Goods: A Mandate to Abandon Legal Ethnocentricity, 16 J.L. & Com. 257 (1997) [available at <http://cisgw3.law.pace.edu/cisg/biblio/1cook.html>]; Danielle A.
Thompson, Commentary, Buyer Beware: German Interpretation of the CISG has led to Results Unfavorable to Buyers, 19 J.L. & Com. 245, 263 (2000) ("Perhaps the decision of the
Oberlandesgericht [German appellate court] can be explained as a demonstration of the formalism
and strictness that pervades German culture.").

11. Some have argued that substantive uniformity can be obtained only through the use of
foreign case law, especially of upper level or supreme courts, as binding precedent. Others have
rejected such a common law view of precedent in favor of the use of foreign cases as persuasive
precedent. The later opinion is the correct one given that the CISG fails to provide an express
mandate to view foreign cases as binding precedent. Furthermore, the lack of an international
appellate body renders such a view impracticable and unwise. My view is akin to the persuasive
precedent approach. I believe that courts and arbitral panels have a duty to review all relevant cases
on the contested legal issues. It also has a duty to explain its decision using CISG interpretive
methodology in the case of diverging interpretations. In this regard, Professor Ferrari misunderstood
my (Larry A. DiMatteo) analysis of this subject. He correctly criticizes the binding precedent view
as follows:

First, from a substantive point of view, stating that uniform case law should be treated as binding
precedent does not take into account that a uniform body of case does not per se guarantee the
correctness of a substantive result. ... Second, from a methodological point of view, the suggestion
to create a supranational stare decisis ... must be criticized, since it does not take into account the
rigid hierarchical structure of the various countries' court systems ... .

Ferrari, CISG Case Law, supra note 2, at 259 (emphasis added). I agree. I also admit that I
inappropriately fashioned the phrase "supranational stare decisis." By that I did not mean to indicate
that all foreign decisions, at what ever level of the judicial system and whatever the quality of the
analysis, should be accepted as binding precedent. This is indicated by the fact that the full phrase
used was "informal supranational stare decisis." Larry A. DiMatteo, The CISG and the Presumption
of Enforceability: Unintended Contractual Liability in International Business Dealings, 22 Yale J. Int'l
L. 111, 133 (1997) (hereinafter DiMatteo, Presumption of Enforceability) [available at <http://cisgw3.law.pace.edu/cisg/biblio/dimatteo.html>]. My major fault lies in not
explaining what I meant by informal. Since there is no supranational appellate process to speak of
binding precedent is nonsensical. Thus, courts are free to disregard foreign cases that demonstrate
poor reasoning and fail to comply with CISG interpretive methodology. In reviewing Italdecor SAS
v. Yiu's Indus., Romito and Sant 'Elia conclude that "because of the inconsistencies in the reasoning
... its opinion will probably have little persuasive value for other CISG cases." Romito & Sant 'Elia,
Homeward Trend, supra note 10, at 203.

16. "[S]tatements made by and other conduct of a party are to be interpreted according to the
understanding that a reasonable person of the same kind as the other party would have had in the
circumstances." CISG, supra note 4, at art. 8(2).

17.Id. at 9(2). ("The parties are considered ... to have impliedly made applicable to their
contract or its formation a usage ... .").

18. Professor Robert Scott has argued that the Uniform Commercial Code has failed in its quest
of substantive uniformity. See generally, Robert E. Scott, Is Article 2 the Best We Can Do?, 52
Hastings L.J. 677 (2001). Professor Scott states the dilemma of comprehensive code writing: "[T]he
pressure to formulate rules that will be uniformly adopted distorts the rules themselves in ways that
may, quite perversely, undermine the very objective of a uniform law in the first instance." Id. at 680.
In more prosaic terms, he argues that necessitated compromise result in mushy drafting at the expense
of "precise, bright line rules ... ." that "generate predictable outcomes ... ." Id. at 682. Thus, formal
uniformity or adoption uniformity is gained with a loss of predictability or uniformity of application
(substantive uniformity). See also Alan Schwartz & Robert E. Scott, The Political Economy of Private Legislatures, 143 U. Pa. L. Rev. 595 (1995) (arguing that the structural forces within the
UCC Article 2 drafting process necessarily leads to vague, open-ended rules).

19.See infra Part I.B.2 (discussing the importance of viewing the CISG as a code).

20. Professors Enderlein and Maskow state that "there is a difference with uniform laws insofar as this incorporation elucidates the international character of the perspective rule, underlines its
special position in domestic law, and furthers an interpretation and application which is oriented to
the standardization of law." Fritz Enderlein & Dietrich Maskow, International Sales Law 8 (1992)
(emphasis in original) (hereinafter, Enderlein & Maskow) [available at <http://cisgw3.law.pace.edu/cisg/biblio/enderlein.html>].

24. Should parties whose countries have ratified the CISG wish to opt-out of the convention,
they should do so by explicit mention in the contract. See generally Paul M. McIntosh, Selected Legal
Aspects of International Sales Transactions: The United Nations Convention on Contracts for the
International Sale of Goods, Bus. Credit, Oct. 1, 2001, available at 2001 WL 12570546.

26. Philip Hackney, Is the United Nations Convention on the International Sale of Goods Achieving Uniformity?, 61 La. L. Rev. 473 (2001).

27. Professor Hackney rejects the argument that the CISG has increased the legal impediments
to trade because it produces greater complexity. He responds that "this objection should fade with
time, as a body of case law builds around the Convention." Id. at 476.

29. Professor Robert Scott discusses the difference between formal uniformity and substantive
uniformity. He further discusses the different dimensions of substantive uniformity as being the
interpretive function and the standardizing function. The interpretive function involves the uniform
interpretation of contract terms. The standardizing function involves the "task of creating broadly
suitable default rules." Robert E. Scott, The Uniformity Norm in Commercial Law, in The Jurisprudential Foundations Of Corporate And Commercial Law 149-50 (Jody S. Kraus & Steven
D. Walt, eds. 2000) (hereinafter Scott, Uniformity Norm).

44. For an example of soft law uses in a different context see, Larry A. DiMatteo, Contract Talk:
Reviewing the Historical and Practical Significance of the Principles of European Contract Law, 43
Harv. Int'l L. J. 569 (2002) (discussing soft law nature of the Principles of European Contract Law) [available at <http://cisgw3.law.pace.edu/cisg/biblio/dimatteo2.html>];
see generally, Harold J. Berman, The Law of International Commercial Transactions (Lex
Mercatoria), 2 Emory J. Int'l Disp. Resol. 235 (1988).

45. The CISG can be used as a compromise choice of law for parties from different national legal
systems. This voluntary use of the CISG by international businesspersons is premised on the
categorization of the CISG as a neutral set of legal rules. "To adopt the CISG certainty does not give
an advantage to either party and is in the true sense a neutral system of law." Bruno Zeller, The Development of Uniform Laws -- A Historical Perspective, 14 Pace Int'l L. Rev, 163, 176-77 (2002) (emphasis added) [available at <http://cisgw3.law.pace.edu/cisg/biblio/zeller5.html>]. The CISG can be used to prevent the breakdown of contract negotiations over
the issue of choice of law or to prevent the appearance of overreaching by the insertion of the national
law of one of the parties. Contract negotiators can opt into the CISG when the contract is not within
the jurisdiction of the CISG or elect not to opt out in case of its mandatory default application.

47. This is especially true when arbitrators are authorized to decide ex aequo bonos or as amiables compositeurs.

48. The selectivity is due to a number of considerations including the increasing number of
reported cases, especially in countries like Germany, the unavailability of English translations, and the
clustering of cases among a number of issues. For example, an in-depth jurisprudence has developed
in areas such as determining reasonable inspection and notice under Articles 38 and 39, the
calculation of interest alluded to in Article 78, and measuring the nature of a breach as being
fundamental or not. Some provisions of the CISG have yet to develop critical mass of cases. See generally, John O. Honnold, The Sales Convention: From Idea to Practice, 17 J.L. & Com. 181, 186-196 (1998) [available at <http://cisgw3.law.pace.edu/cisg/biblio/honnold4.html>]. Although, CISG jurisprudence has become more comprehensive since Professor
Honnold's commentary in 1998 a deeper jurisprudence still needs to be developed in numerous areas
of CISG coverage.

49. D. King, The New Conceptualism of the Uniform Commercial Code 9 (1968).

50. "Before the reference to the proper domestic law ... one may follow two methods ... first
is the analogical application of specific provisions ... second is the reference to general principles
which are explicitly stated ... or are derived from the set of the Convention's provisions." Anna
Kazimierska, The Remedy of Avoidance under the Vienna Convention on the International Sale of
Goods, in Review of the Convention on Contracts for the International Sale of Goods: 1999-2000
(Pace Int'l Law Review, ed. 2000) at 172 [hereinafter Kazimierska, Remedy of Avoidance] (reference
to the Review Of The Convention On Contracts For The International Sale Of Goods: 1999-2000) [hereinafter, Review Of The Convention] [available at <http://cisgw3.law.pace.edu/cisg/biblio/kazimierska.html>].

51.Contra, Henry Gabriel, Practitioner's Guide To CISG And UCC (1994). "[I]f the express
words of a particular article fails to resolve a conflict, the CISG requires the conflict to be resolved
by the underlying principles that led to the adoption of the provision in question." Id. at 29.

52.See generally Michel J. Bonell, Introduction to the Convention, in Commentary On The
International Sales Law 79 (Cesare M. Bianca & Michael J. Bonell, eds. 1987); see also Phanesh Koneru, The International Interpretation of the UN Convention on Contracts for the International Sale of Goods: An Approach Based on General Principles, 6 Minn. J. Global Trade 105 (1997) [available at <http://cisgw3.law.pace.edu/cisg/biblio/koneru.html>]

53. "If the Convention failed to anticipate and thus provide a specific solution to an issue, an
analogical extension from the existing provisions to the new situation is then appropriate." Koneru,
supra note 52, at 122, citing, John O. Honnold, Uniform Law For International Sales 3 (2d ed. 1991);
see also Mark N. Rosenberg, The Vienna Convention: Uniformity in Interpretation for Gap-Filling --
An Analysis and Application, supra note 15.

54.See generally Kazimierska, Remedy of Avoidance, supra note 50, at 172 (arguing that both
methods are non-hierarchical in application).

55. The use of domestic law "represents under the ... uniform law a last resort to be used only
if and to the extent a solution cannot be found either by analogical application of specific provisions
or by the application of general principles underlying the uniform law as such." Bonell, supra note
52, at 83 cited in Franco Ferrari, Uniform Interpretation, supra note 15, at 228.

56. Professor Miller states the importance of deterring interpreters from acting on such
temptation. Uniformity is especially important "where the uniform provision perhaps represents a less
desirable position but nonetheless forms an important part of a compromise reflecting a desirable,
overall balance and where, if one provision is altered by non-uniformity, significant threat to the
overall consensus is posed." Miller, supra note 28, at 722-23.

58. "In the interpretation of this Convention, regard is to be had to its international character and
to the need to promote uniformity in its application and the observance of good faith in international
trade." CISG, supra note 4, at art. 7(1).

60. "[T]he Convention, once adopted, is intended to replace all rules in [domestic] legal systems
previously governing matters within its scope ... . This means that in applying the Convention there
is no valid reason to adopt a narrow interpretation." Id. at 202. See also Kazimierska, supra note
50, at 160-67 (arguing that the validity exclusion in Article 4(a) should be interpreted narrowly so
that the scope of the CISG is more broadly applied).

62.Id. at art. 9(1). For a discussion of the principles of "international character" and "good
faith," see generally Bruno Zeller, The UN Convention on Contracts for the International Sale of Goods -- A Leap Forward Towards Unified International Sales Law, 12 Pace Int'l L. Rev. 79 (2000) [available at <http://cisgw3.law.pace.edu/cisg/biblio/zeller3.html>].

63.See generally Lisa M. Ryan, The Convention for the International Sale of Goods: Divergent Interpretations, 4 Tul. J. Int'l L & Comp. L. 99, 100 (1995); Amy Kastely, Unification and
Community: A Rhetorical Analysis of the United Nations Convention, 8 Nw. J. Int'l L. & Bus. 601,
601-02 (1988) (stating that the CISG must be interpreted "as a text that is shared by an international community") [available at <http://cisgw3.law.pace.edu/cisg/biblio/kastely.html>].

64. Kazimierska, supra note 50, at 175. See also Romito & Saint 'Elia, Homeward Trend, supra
note 10, at 200 ("requiring that notice be given by an avoiding party of a remedy as drastic as
avoidance to encourage certainty in transactions."); Article 57(1)'s default rule that place of payment
is based upon the general principle that payment should be made at the domicile of the creditor.
SCEA des Beauches v. Société TesoTen Elsen, Cour d'appel Grenoble [Regional Court of
Appeals][CA], 94/3859, Oct. 23, 1996 (Fr.), available at
<http://cisgw3.law.pace.edu/cases/961023f1.html> [English translation by Katarina Kunce Kern, translation edited by Kirstin Stadtländer].

71. A party must pay damages "in the light of the facts and matters of which he knew or ought
to have known, as a possible consequence of the breach of contract." CISG, supra note 4, at art. 74.

72. A French court held that the principle against abrupt discontinuance is applied through an
inter-party business usage as permitted under Article 9: "[B]y virtue of Article 9 CISG, [a party is]
liable for abrupt discontinuance of business relations between parties bound by long-standing
practices." Caiato v. SA.S.F.F. Court d'appel Grenoble [Regional Court of Appeals][CA], 93/4126,
Sept. 13, 1995 (Fr.), available at [<http://cisgw3.law.pace.edu/cases/950913f1.html>] [English translation by Annabel Teiling, translation edited by Yvonne Salmon].

73. For example, the CISG fails to define key terms such as "fundamental breach." "A breach
of contract committed by one of the parties is fundamental if it results in such detriment to the other
party as substantially to deprive him of what he is entitled to expect under the contract ... ." CISG,
supra note 4, at art. 25 (emphasis added). See also CISG, supra note 4, at art. 46(2) ("fundamental
breach"), at art. 51(2) ("fundamental breach"), at art. 64(1) ("fundamental breach"), at art. 70
("fundamental breach"), at art. 64(2) ("in respect to any breach), at art. 70 ("committed a
fundamental breach"), at art. 71(1) ("not perform a substantial part"), at art. 73(1) & (2)
("fundamental breach"), at art. 82(2) ("substantially in the condition").

74.See generally CISG, supra note 4, at art. 8 ("reasonable person"), at art. 18(2) ("reasonable
time"), at art. 25 ("reasonable person"), at art. 27 "means appropriate in the circumstances"), at art.
33(c) ("within a reasonable time"), at art. 34 "(unreasonable inconvenience or unreasonable
expense"), at art. 35(b) ("unreasonable for him to rely"), at art. 37 "(unreasonable inconvenience or
unreasonable expense"), at art. 38(1) ("short a period as is practical under the circumstances"), at art.
39 ("reasonable time"), at art. 43(1) ("reasonable time"), at art. 44 ("reasonable excuse"), at art. 46(2)
("reasonable time"), at art. 46(3) ("unreasonable having regard to all circumstances" and "reasonable
time"), at art. 47(1) ("reasonable length for performance"), at art. 48(1)("without unreasonable delay"
and "unreasonable inconvenience and uncertainty"), at art. 48(2) ("unreasonable time"), at art. 55
("price generally charged"), at art. 60(a) ("reasonable be expected"), at art. 63(1) ("time of
reasonable length"), at art. 64(2) ("within a reasonable time"), at art. 65(1) ("within a reasonable
time"), at art. 65(2) ("fix a reasonable time"), at art. 68 ("if the circumstances so indicate"), at art.
75 ("reasonable manner and within a reasonable time"), at art. 76(2) ("reasonable substitute"), at art.
77 ("measures as are reasonable in the circumstances"), at art. 79(1) ("could not reasonable be
expected"), at art. 79(4) ("within a reasonable time"), at art. 85 ("takes steps as are reasonable in the
circumstances"), at art. 86(1) ("reasonable in the circumstances"), at art. 86(2) ("without
unreasonable inconvenience or unreasonable expense"), at art. 87 ("not unreasonable"), at art. 88(1)
("any appropriate means," "unreasonable delay, and "reasonable notice"). See, e.g., infra Part V.A.2.
(time of delivery).

75. The cases reviewed were taken from abstracts, summaries, and commentaries provided
mainly in "CISG Case Presentations" in the Pace Law School website at
<http://cisgw3.law.pace.edu/cisg/text/casecit.html>, the UNILEX database at <http://www.unilex.info>,
and CLOUT Abstracts at A/CN.9/SER.C/ABSTRACTS or at the UNCITRAL website at
<http://www.un.or.at/uncitral>. UNCITRAL regularly releases abstracts of CISG court and arbitral
decisions under the name CLOUT. These abstracts are prepared by National Reporters of countries
that have ratified or adopted the CISG.

76. Professor Ferrari states that "most general principles have not been expressly provided for
by the Convention. Consequently, they must be deduced from its specific provisions ... ." Ferrari,
Uniform Interpretation, supra note 15, at 224.

77.See, e.g., Kazimierska, supra note 50, at 79. "The remedy of avoidance should not be
analyzed without taking into account the general provisions of the Convention ... . The Convention
constitutes one whole and its general provisions are of the utmost importance while considering
particular issues regulated under it." Id. at 155.

81. "It was also found that in relations between merchants it was expected that the seller, due
to delayed payment, would resort to bank credit at the interest rate commonly practiced in its own
country." Id. The implication of a principle of full compensation will be further discussed in Part
VI.C.2.a.'s discussion of "foreseeability."

86. "It is suggested that the good faith principle, applied in the interpretation of the provisions
of the Convention, has at the same time an effect on the contract between the parties to which the
Convention is applied." Review of the Convention, supra note 50, at 169.

87. "[T]he general principles underlying many provisions of the Convention collectively impose
an obligation of good faith on the parties." See, e.g., Koneru, supra note 52, at 107.

89. "From the medieval lex mercatoria to the present, most specific rules of business can be
traced to the norm of good faith and fair dealing." DiMatteo, Presumption of Enforceability, supra
note 11, at 146.

92. As discussed above, the CISG recognizes the right to the payment of interest. However,
it fails to provide specific rules as how the interest is to be calculated. Interpreters have had to
fabricate more specific default rules. For example, in a case from the Netherlands, a court held that
the parties agreed that payment was to be in German currency the rate of interest should be
determined under German law. Nieuwenhoven Viehandel GmbH v. Diepeveen-Dirkson B.V.,
Arrondissementsrechtbank Arnhem [District Court] [RB], 1992/1251, Dec. 30, 1993 (Neth.),
available at <http://cisgw3.law.pace.edu/cases/931230n1.html>. An ICC arbitration panel applied the
rate commonly applied to Eurodollar settlements in international trade. CLOUT Case No. 103,
available at [<http://cisgw3.law.pace.edu/cases/936653i1.html>].

100. Where administrative or criminal law requires that a contract be in writing, sanctions would
be enforceable against the offending party, but the contract itself would still be enforceable. See
Secretariat Commentary, Guide to Article 11, available at
<http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-11.html>.

101. Although most Western legal systems abandoned the requirement of a writing for the sale
of movable property, the UCC § 2-201 requires contracts for the sale of goods over $500 to be in
writing. At the time of drafting, many socialist legal systems also required a writing for a binding
contract. CISG, supra note 4, at art. 12.

102.Id. at art. 96. Argentina, Belarus, Chile, China, Estonia, Hungary, Lithuania, the Russian
Federation, and the Ukraine are countries that may still require a writing, pursuant to the Article 12
exclusion. See Seigfried Eiselen, Electronic Commerce and the UN Convention on Contracts for the
International Sale of Goods (CISG) 1980, 5 Edi L. Rev. 21, 36 (1999) available at
<http://cisgw3.law.pace.edu/cisg/biblio/eiselen1.html>.

106. Eiselen, supra note 102, at 35. Article 1.10 of the UNIDROIT Principles extends the
meaning of "written" to "any mode of communication that preserves a record of the information
contained therein and is capable of being reproduced in tangible form." See Seig Eiselen, Remarks on the Manner in which the Unidroit Principles of International Commercial Contracts May be Used to Interpret or Supplement Article 29 of the CISG, 14 Pace Int'l L. Rev. 379, 382 (2002) (suggesting
that Article 13 should be extended to include the modern language of Article 1.10 of the UNIDROIT Principles) [available at <http://cisgw3.law.pace.edu/cisg/principles/uni29.html#ed>].

116.See Garro, supra note 114. See also Jacob S. Ziegel, Report to the Uniform Law
Conference of Canada on Convention on Contracts for the International Sale of Goods (1981)
available at <http://cisgw3.law.pace.edu/cisg/text/ziegel11.html> (noting that writing requirements for
contracts of sale were repealed in the United Kingdom in 1954 and in British Columbia in 1954 with
no adverse consequences).

117. UCC § 2-201(1) (2003). An exception to the writing requirement is an oral agreement
between merchants that is followed by a written confirmation. See UCC § 2-201(2).

124.See Alta-Medine v. Crompton Corp., No. 00-C-5901 (HB), 2001 U.S. Dist. LEXIS 18107,
at *15, *16 n.6 (S.D.N.Y. Nov. 7, 2001) (evidence of continuing relationship insufficient so that there
was "no agreement for the Court to enforce, written or otherwise"); Handelsgericht [Commercial
Court][HG] 45/1994 Dec. 5, 1995 (Switz.), available at
[<http://cisgw3.law.pace.edu/cases/951205s1.html>]. A dissenting opinion in the
Helsinki Court of Appeals stated that "it is apparent that the alleged agreement ought to have been
concluded in writing and that it ought to have contained detailed terms on the obligations of both
parties." Id.

130.See Peter Schlechtriem, Commentary on the UN Convention on the International Sale of
Goods (CISG) 91 (2d ed. 1998) (stating that the minority view which would have the rules of the
reservation state always prevail must be rejected because "the reservation state's universal claim to
the validity of its formal requirements would then exclude the private international law rules of other
Contracting States and make those requirements internationally applicable uniform law.").

133.See Hoge Raad [Supreme Court] [HR] 16.436, 7 Nov. 1997 (Neth.), available at
[<http://cisgw3.law.pace.edu/cases/971107n1.html>]. Even where a party has
a right to insist on a writing requirement through a reservation, the requirement may be interpreted
liberally. Compromex, a Mexican government agency that issues non-binding recommendations in
foreign trade disputes, found that the writing requirement reserved by Argentina was satisfied by an
exchange of documents between parties. SeeConservas La Costeña, S.A. (Jul. 16, 1996) (Mex.)
translated in 17 J.L. & Com. 427 (1998) (In making its recommendation, the agency found that
requiring a formal contract "would be in conflict with the general principles of the CISG.").

135. In a decision by the United States Court of Appeals for the Eleventh Circuit, the court
noted its unfruitful search for cases from other Contracting States regarding the parol evidence rule.
See MCC Marble Ceramic Center, Inc. v. Ceramica Nuova D'Agostino, S.p.A., 144 F.3d 1384, 1390
n.14 (11th Cir. 1998).

136. Virtually all states in the United States apply the UCC to contracts for the sale of goods
valued at $500 or more. UCC § 2-201(1) provides: "a contract for the sale of goods for the price of
$500 or more is not enforceable by way of action or defense unless there is some writing sufficient
to indicate that a contract for sale has been made between the parties and signed by the party against
whom enforcement is sought or by his authorized agent or broker."

139.Id. at 1391. See also Harry M. Fletchner, Recent Developments: CISG, 14 J.L. & Com.
153, 157 (1995) [available at <http://cisgw3.law.pace.edu/cisg/biblio/flechtner.html>] (criticizing the Beijing Metals opinion and noting that "[c]ommentators generally
agree that article 8(3) rejects the approach to the parol evidence questions taken by U.S. domestic
law" (citations omitted)). But see, David H. Moore, Note, The Parol Evidence Rule and the United
Nations Convention on Contracts for the International Sale of Goods: Justifying Beijing Metals &
Minerals Import/Export Corp. v. American Business Center, Inc., 1995 B.Y.U. L. Rev. 1347, 1361-63 (1995) [available at <http://cisgw3.law.pace.edu/cisg/biblio/beijing.html>] (arguing that the parol evidence rule could be an appropriate way to discern what
consideration is "due" under Article 8(3) and that the parol evidence rule discourages perjury and bad
faith thereby promoting good faith and uniformity in the interpretation of contracts as expressed in
CISG, article 7). See generally, Hackney, supra note 26, at 481-82 (discussing Beijing Metals and
commentators fear that courts will interpret the CISG by reference to domestic law because of the
lack of case law).

144. Article 8(1) states that "statements made by and other conduct of a party are to be
interpreted according to his intent where the other party knew or could not have been unaware what
that intent was." See MCC-Marble, 144 F.3d at 1391; Shuttle Packaging Sys. v. Jacob Tsonakis,
INA, S.A., 1:01-CIV-691, 2001 U.S. Dist. LEXIS 21630, at *22 (W.D. Mich. Dec. 17, 2001);
Mitchell Aircraft Spares, Inc. v. European Aircraft Service AB, 23 F. Supp. 2d 915, 921 (N.D. Ill.
1998).

149. The court admitted evidence of the parties' subjective intent but stated that, "We find it
nothing short of astounding that an individual, purportedly experienced in commercial matters, would
sign a contract in a foreign language and expect not to be bound simply because he could not
comprehend its terms." MCC-Marble, 144 F.3d at 1387 n.9. The court noted that the CISG's
adoption of subjective intent is a rejection of Holmesian objectivity: "The law has nothing to do with
the actual state of the parties' minds. In contract, as elsewhere, it must go by externals and judge
parties by their conduct." Id. at 1387 n.8. Following the lead of the MMC-Marble decision, other
U.S. courts have found that the parol evidence rule does not apply to agreements governed by the
Convention and that the subjective intent of the parties must be considered in determining the scope
of the agreement. One court held that the subjective intent of the parties had to be considered where
a purchase order was ambiguous. Mitchell Aircraft, 23 F. Supp. 2d at 921. Another court held that
a non-competition agreement was not invalid for failing to specify the restricted area, because the
parties' intent to apply the restriction to the United States' market was evident by its statements and
conduct. Shuttle Packaging Sys., 2001 U.S. Dist. LEXIS 21630, at *22. Contra, Alta-Medine v.
Crompton Corp., 00 CIV. 5901 (HB), 2001 U.S. Dist. LEXIS 18107, at *15 & n.6 (S.D.N.Y. Nov.
7, 2001). This case involved a disputed distributorship agreement in which the court focused on an
informal writing as significant evidence because it was "the only clear communication between the
parties ... ." It further stated that it was "immaterial ... whether the ...CISG applies," the court
concluded that there was "no agreement for the Court to enforce, written or otherwise ... ." The
court failed to realize that the CISG treats the admissibility of evidence quite differently and that
evidence such as the subjective intent of the parties as well as their prior relationship and course of
dealings might have influenced its conclusion.

150.See GPL Treatment v. Louisiana-Pacific Corp., 894 P.2d 470 (Ct. App. 1995). See
generally Charles Sukurs, Harmonizing the Battle of the Forms: A Comparison of the United States,
Canada, and the United Nations Convention on Contracts for the International Sale of Goods, 34
Vand. J. Transnat'l L. 1481, 1512-13 (2001) (discussing challenges in harmonizing CISG and
domestic law) [available at <http://cisgw3.law.pace.edu/cisg/biblio/sukurs.html>].

151. UCC §§ 2-201(1) & (2)(1977). The Oregon statute used by the court is a verbatim
codification of the UCC section.

154.See Vestnik Vysshego Arbitrazhnogo Suda RF [Highest Court of Arbitration][Vestn.
Vyssh. Arb. Suda RF], Information Letter 29, Feb. 16, 1998 (Russ.), available at <http://cisgw3.law.pace.edu/cases/980216r1.html> (modification by telephone not valid where buyer had its
place of business in the Russian Federation and the former U.S.S.R. had made a declaration in
accordance with Articles 12 and 96); Vestn. Vyssh. Arb. Suda RF, Res. No. 4670/96, Mar. 25, 1997
(Russ.), available at <http://cisgw3.law.pace.edu/cases/970325r2.html> (modification of terms of
delivery must be in writing); Vital Berry Marketing NV v. Dira-Frost NV, AR 1894/94, Rechtbank
van Koophandel, Hasselt, May 2, 1995 (Belg.) available at
[<http://cisgw3.law.pace.edu/cases/950502b1.html>] (attempt to modify price
not valid where seller was from Chile, a State which had made declaration under Articles 12 and 96).

164.See Graves Import Co., 1994 U.S. Dist. LEXIS 13393 at *13; ICC Court of Arbitration -- Zurich Arbitral Awards, 9117, (Mar. 1998), available at
[<http://cisgw3.law.pace.edu/cases/989117i1.html>] (arbitral tribunal compared
Article 29(2) to UNIDROIT principles, Articles 2.17 and 2.18 to reach conclusion that a party could
not rely on oral promises, assurances, or writings not included in the contract and that there was no
reason to apply the exception clause which prevents a party from making use of the no oral
modification clause if its conduct would lead the other party to rely); Cong ty Ng Nam Bee v. Cong
ty Thuong mai Tay Ninh, People's Supreme Court, Appeal Division in Ho Chi Minh City, 74/VPPT,
Apr. 5, 1996 (Vietnam), available at
[<http://cisgw3.law.pace.edu/cases/960405v1.html>] (holding that letter of credit is a
type of extrinsic evidence, inadmissible to contradict contract terms where parties had a 'four-corner
clause').

166.See generally, Robert A. Hillman, Article 29(2) of the United Nations Convention on Contracts for the International Sale of Goods: A New Effort at Clarifying the Legal Effect of "No Oral Modification" Clauses, 21 Cornell Int'l L.J. 449 (1988) (reviewing problems raised by no oral
modifications and suggesting that new drafters take an approach that compromises less by either
enforcing or abolishing such clauses) [available at <http://cisgw3.law.pace.edu/cisg/biblio/hillman2.html>].

169.See Geneva Pharm. Tech. Corp., 201 F. Supp. 2d at 282-83 (court used New Jersey law
to determine whether there was consideration). See generally, Helen Elizabeth Hartnell, Rousing the
Sleeping Dog: The Validity Exception to the Convention on Contracts for the International Sale of
Goods, 18 Yale J. Int'l L. 1, 45 (1993) (proposing that courts seek a middle course in approaching
the validity issue, looking to domestic to determine whether an issue is one of validity but also
considering the international aspect of the CISG) [available at <http://cisgw3.law.pace.edu/cisg/biblio/hartnell.html>]; Gyula Eörsi, Problems of Unifying Law on the
Formation of Contracts for the International Sale of Goods, available at
<http://cisgw3.law.pace.edu/cisg/text/eorsi29.html> (recognizing that lack of consideration could be a
validity issue but that it is more likely that contract formation does not require consideration, a
conclusion which he maintains is supported by "the fact that the question did not even surface, in
connection with the 1964 Hague Convention on Formation (ULF)").

185.Id. at art. 18(2). According to Professor Honnold, the drafters purposely put the burden
on the sender of a communication to assure receipt. See Honnold, Uniform Law for International
Sales, supra note 53, § 162, at 184.

193. An Austrian court considered an issue regarding to whom an offer was addressed, more
precisely, whether a contract existed between an Austrian buyer and an Italian manufacturer, when
the buyer made an offer to a German seller. When the Italian manufacturer requested payment, the
buyer maintained that it had contracted only with the German seller. The court held that a contract
between the buyer and manufacturer could exist only if the German seller acted as a qualified agent
acting for the Italian manufacturer and the buyer knew or could not have been unaware that the seller
was acting for the Italian manufacturer. See OGH, 512/96, Jun. 18, 1997 (Aus.), available at
<http://cisgw3.law.pace.edu/cases/970618a3.html> [English translation by Tobias Koppitz].

194. "A Proposal ... constitutes an offer if it is sufficiently definite and indicates the intention
of the offeror to be bound in case of acceptance." CISG, supra note 4, at art. 14(1) (emphasis
added).

195. Two U.S. courts have held that a distributorship agreement is not covered by the CISG if
the goods, quantity, and price are not identified. See Helen Kaminksi Pty. Ltd. v. Marketing
Australian Prods., 1997 U.S. Dist. LEXIS 10630, at *2-3 (S.D.N.Y. Jul. 23, 1997) (distributorship
agreement did not identify the goods that were the subject of the alleged breach); Viva Vino Import
Corp. v. Farnese Vini S.r.l., No. 99-CIV.-6384, 2000 U.S. Dist. LEXIS 12347 (E.D. Pa. Aug. 29,
2000) (distributorship agreement did not cover the sale of specific goods nor did it contain definite
terms regarding quantity and price as required by CISG).

196. Some countries objected to the elimination of the price requirement because they viewed
unilateral price determination as a disadvantage to the weaker party; socialist countries objected
because open price terms did not satisfy state planning agency requirements. See Jacob S. Ziegel,
"Article 14" in Report to the Uniform Law Conference of Canada on Convention on Contracts for
the International Sale of Goods, July 1981, available at <http://cisgw3.law.pace.edu/cisg/text/ziegel14.html>. See also Claude Witz, Case Commentary, The First
Decision of France's Court of Cassation Applying the U.N. Convention on Contracts for the
International Sale of Goods, 1995, available at <http://cisgw3.law.pace.edu/cases/950102f1.html>
(noting that "traditional French case law is very demanding with respect to the determinable character
of price" but that it is in the process of abandoning "this harsh position").

197.See, e.g., Fauba v. Fujitsu Microelectronik, Cour de Cassation, Paris, 92-16.993, Apr. 22,
1992 (Fr.) (term specifying revision of price according to market trends was sufficiently definite),
available at <http://cisgw3.law.pace.edu/cases/920422f1.html>; OLG Frankfurt/M 10 U 80/93, Mar.
4, 1994 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/940304g1.html> [English translation by Dr. Peter Feuerstein, translation edited by Todd J. Fox] (some items in the
order contained prices but as buyer insisted on delivery of total order, the offer was not sufficiently
definite under either German Civil Code or CISG Art. 14 because special screws did not contain a
price).

198. For a discussion of the "totality of the circumstances analysis" approach to contract
interpretation see generally, Larry A. DiMatteo, The Counterpoise of Contracts: The Reasonable
Person Standard and the Subjectivity of Judgment, 48 S.C. L. Rev. 293, 318-24 (1997); Larry A.
Dimatteo, Contract Theory: The Evolution Of Contractual Intent 56-60 (1998).

199.See AZ 12.G.41.471/1991, Mar. 24, 1992, supra note 132. (quality, quantity, and price of
goods impliedly fixed by the established practice of parties where seller repeatedly delivered the same
type of goods and buyer paid after delivery).

200. ICC Court of Arbitration - Paris 8324/1995 (Arbitral Award 1995) [available at <http://cisgw3.law.pace.edu/cases/958324i1.html>] (flexible price was valid where no market price established by common exchange institution for manganese) (on file with author).

213.Id. As a result, "a contradiction remains between [this] requirement ... on the one hand
and the possibility of fixing the price after the contract is concluded on the other." Professor
Schlechtriem concludes that, although most likely unacceptable to many states, this contradiction may
be resolved by interpreting the term "validity" in art. 55 to relate to all contractual requirements other
than the determination of price. Id. at 80, n.319. If such an interpretation is adopted, "[a]n offer that
is indefinite with respect to the price could then be interpreted ... as an implied reference to the price
generally charged for such goods."

214.See John E. Murray, Jr., An Essay on the Formation of Contracts and Related Matters
Under the United Nations Convention on Contracts for the International Sale of Goods, 8 J.L. &
Com. 11, 14-17 (1988) [available at <http://cisgw3.law.pace.edu/cisg/biblio/murray.html>]; Harry M. Fletchner, Transcript of a Workshop on the Sales Convention:
Leading CISG Scholars Discuss Contract Formation, Validity, Excuse for Hardship, Avoidance,
Nachfrist, Contract Interpretation, Parol Evidence, Analogical Application, and Much More, 18 J.L.
& Com. 191, 202-06 (1999) [available at <http://cisgw3.law.pace.edu/cisg/biblio/workshop.html>]. Professor Farnsworth disagrees with this interpretation because Article
55 allows this method of determining a price only when "a contract has been validly concluded." Id.

215. Honnold, Uniform Law For International Sales, supra note 53, § 137.6 at 154. Art. 6
provides: "The parties may exclude the application of this Convention or, subject to article 12,
derogate from or vary the effect of any of its provisions." (emphasis added), CISG at Art.6.
Professor Farnsworth disagrees with this interpretation because Art. 55 allows this method of
determining a price only when "a contract has been validly concluded."

230. An arbitrator in Austria cited Art. 16(2)(b) as further support for recognition that the
principle of estoppel, although not addressed expressly in the Convention, is incorporated by the good
faith provision of Art. 7(1). See Internationales Schiedsgericht der Bundeskammer der gewerblichen
Wirtschaft [Austrian Int'l Chamber of Commerce Arbital Body, Vienna], SCH-4318, Jun. 15, 1994
(Aus.), available at <http://cisgw3.law.pace.edu/cases/940615a4.html>.

234.Id. at 287. See generally, Henry Mather, Firm Offers Under the UCC and the CISG, 105
Dick. L. Rev. 31 (2000) (predicting that courts will use Art. 16(2)(b) as U.S. courts have used
promissory estoppel).

246.See generally, Maria del Pilar Perales Viscasillas, Battle of the Forms, Modification of
Contract, Commercial Letters of Confirmation: Comparison of the United Nations Convention on
Contracts for the International Sale of Goods (CISG) with the Principles of European Contract Law
(PECL), 14 Pace Int' L. Rev. 153 (2002) (describing the variability in legal interpretations of silence) [available at <http://cisgw3.law.pace.edu/cisg/biblio/pperales.html>].

257.Id. Although the court did not view the buyer's silence regarding the letter of confirmation
as acceptance, it did, nevertheless, find that the letter was evidence of the terms of the oral contract
and held for the seller.

258.See OLG Dresden 7 U 720/98, Jul. 9, 1998 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/980709g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen]. But see OLG Saarbrücken 1 U 324/99-59, Feb.
14, 2001 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/010214g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen]. In this case, the
court held that the CISG applied to the contract for the sale of doors and windows and applied the
provisions on notice for specifying a defect, but looked to the German Civil Code regarding
acceptance of terms in a letter of confirmation. The court stated, "[i]t is an accepted trade usage that
a tradesperson who receives a letter of confirmation has to object to the letter's content if he does not
wish to be bound by it. If he does not object, the contract is binding with the content given to it in
the letter of confirmation, unless the sender of the letter has either intentionally given an incorrect
account of the negotiations, or the content of the letter deviates so far from the result of the
negotiations that the sender could not reasonably assume the recipient's consent. The recipient's
silence causes the contract to be modified or supplemented in accordance wit the letter of
confirmation." Id.

259.See Dr. Martin Schmidt-Kessel, On the Treatment of General Terms and Conditions of
Business under the UN Convention on Contracts for the International Sale of Goods (CISG),
available at <http://cisgw3.law.pace.edu/cases/011031g1.html> (criticizing interpretation of German
Federal Supreme Court of 31 October 2001, VII ZR 60/01 in which the Supreme Court held that "the
user of general terms and conditions is required to transmit the text to the other party or make it
available in another way").

260. Cour d'appel [Appeal Court][C.A.] Paris 95-018179, Dec. 13, 1995 (Fr.), available at
<http://cisgw3.law.pace.edu/cases/951213f1.html> [English translation by Charles Sant 'Elia]. In the same case, the court held that standard terms
in a confirmation letter from the seller were not valid when the letter was sent after the contract had
been performed.

267.Id. Although the court relied on the CISG, it also noted that the Uniform Sales Law
requires users of general terms and conditions to transmit the text or make it available in another way.
The Supreme Court of Germany's decision to require the terms to be transmitted has been criticized
as "contrary to commercial practice." Whether or not the terms should be incorporated in the
contract should turn on whether a reasonable party was aware or could not have been unaware of the
intent to include such terms. One author maintains that a general duty to transmit standard terms
goes too far and is not supported by the Convention. This author fears that the development of a
general duty to transmit may prevent even better known standard terms from being included, absent
transmission. See Schmidt-Kessel, supra note 259 ("The development of a general duty to transmit
without recognizable exceptions would have the effect that other, better known standard clauses -- such as Incoterms 2000, the several ECE-Terms, or branch-specific terms such as GAFTA 100 or
the rules of the Sugar Association of London -- could not become the basis of contracts without being
transmitted.").

270.Id. Another Belgian case stated that standard terms regarding contractual damages
mentioned in a seller's invoice were not part of the contract because there was no evidence that the
buyer had knowledge of the standard terms and so could not accept them. The written contract did
not include or even mention the standard terms. See Rechtbank van Koophandel Veurne [District
Court] [Kh] A/00/00665, Apr. 25, 2001 (Belg.), available at
<http://cisgw3.law.pace.edu/cases/010425b1.html> [English translation by Vincent Naveaux, translation edited by Sieg Eiselen].

277.See generally Maria del Pilar Perales Viscasillas, "Battle of the Forms" Under the 1980 United Nations Convention on Contracts for the International Sale of Goods: A Comparison with Section 2-207 UCC and the UNIDROIT Principles, 10 Pace Int'l L. Rev. 97, 104-36 (2001)
(describing various interpretive approaches to the Convention and arguing that the Convention rules
are sufficient to solve the battle of the forms conflict) [hereinafter Viscasillas, Battle of the Forms].

282. If the parties have not performed, there is a greater chance that courts will find no valid
contract existed when material terms are in dispute. This was the decision in a German case. The
court held that no contract was formed where the parties' correspondence and oral communications
failed to agree on the quality of glass for test tubes. Citing Articles 18(1), 19(1) and 19(3), the court
found that there was no subsequent conduct of the parties showing the existence of the contract.
OLG Frankfurt 25 U 185/94, Mar. 31, 1995 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/950331g1.html> [English translation by Dr. Peter Feuerstein, translation edited by Chantal Niggemann].

283.See generally Schlechtriem, supra note 279. Both Art. 2.22 of the UNIDROIT Principles
and Article 2:209 of the European Principles allow a valid contract to be found despite conflicting
terms. Common content, terms and conditions become part of a the contract, while conflicting terms
are irrelevant or "knocked out." UCC § 2-207(3) recognizes a contract where the parties' conduct
provides evidence of an intent to contract despite conflicting terms in exchanged forms. Under § 2-207(3), the contract consists of those terms on which the parties agree; conflicting terms are knocked
out. The German Civil Code, sections 154 and 155, follows the "partiell dissens" rule. See
Viscasillas, supra note 281, at 389.

289.See BGH VIII ZR 304/00, Jan. 9, 2002 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/020109g1.html> [English translation by Alston & Bird LLP, editors: William M. Barron, Esq. & Birgit Kurtz, Esq.] (powdered milk). Professor Viscasillas disagrees
with the theory that there is a tacit derogation from Art. 19 when parties have agreed on the essential
terms and performed despite contradictory terms, maintaining that "performance by the recipient of
the counter-offer indicates objective, subjective, and reasonable assent to the offer." Viscasillas,
Battle of the Forms, supra note 277.

290. Schlechtriem, supra note 279. Professor Schlechtriem, BGH VIII ZR 304/00, supra note
289, states that the last shot doctrine "seems to be the most-followed" but that the German Federal
Supreme Court (BGH) considers the knock out rule to be the prevailing view. Id. Article 209(1)
PECL also follows the knock out rule, excluding conflicting terms from the contract. The European
Principles make specific reference to conflicting general conditions, which will ordinarily not be part
of an otherwise valid contract. According to Article 2:209(2) PECL, however, no contract will be
formed if one party has indicated in advance, explicitly, and not by general conditions, that it does not
intend to be bound by a contract on the basis of paragraph (1) or if he informs the other party without
delay that he does not intend to be bound by such a contract.

295.Id. Two cases from Argentina upheld forum selection clauses in standard forms, but the
rationale employed by the courts regarding the CISG is not clear. In one case, an Argentine buyer
maintained that a forum selection clause was invalid because it was written in a foreign language on
the back of the seller's invoice. See Cámara Nacional de Apelaciones en lo Comercial [Second
Instance Court of Appeal] [CN], Division C, 44.786, Mar. 15, 1991 (Arg.), available at
<http://cisgw3.law.pace.edu/cases/910315a1.html>. The trial court found that the clause was part of
the agreement. On appeal, the buyer argued that Argentine law required express written acceptance
of such provisions. The appellate court, however, stated that forum selection clauses are valid even
if contained in a standard form, under the law of Argentina, unless there is a disparity of bargaining
power between the parties. Id. A subsequent case in Argentina reached the same result. In that case,
however, a Procurator noted that Article 4 of the CISG excludes questions of validity and decided
the validity of the case according to the lex fori, referring to the CISG only for further support that
the clause was enforceable. See Cámara Nacional de Apelaciones en lo Comercial [Second Instance
Court of Appeal], Div. E., 45.626, Oct. 14, 1993, available at
<http://cisgw3.law.pace.edu/cases/931014a1.html>. According to one commentator, Article 4, which
states that validity issues are beyond the scope of the Convention, and Article 81(1), which "provides
a clause for the settlement of disputes with a certain degree of autonomy vis-à-vis the other
contractual terms," should have steered the Argentine tribunals away from considering the CISG in
these cases. See Garro, Recent Developments, supra note 120, at 236 (maintaining that neither the
Quilmes nor the Inta decision addressed whether a contract was validly concluded under Article 19
of the CISG as the forum selection clause was a material alteration of the offer).

297.See Henry D. Gabriel, The Battle of the Forms: A Comparison of the United Nations
Convention for the International Sale of Goods and the Uniform Commercial Code, 49 Bus. Law
1053 (1994); Sukurs, supra note 150, at 1487; Honnold, Uniform Law for International Sales, supra
note 53, at 192 (stating that "'last shot' theories have been rightly criticized as casuistic and unfair").

298.See Viscasillas, Battle of the Forms, supra note 277, at 183 (arguing that "the mirror-image
and last shot rule provide a certainty and legal security for the parties," though rigid, "it provides
adequate protection to the parties in the majority of cases and permits enterprises to more perfectly
plan their standardized transactions").

306. The court refers to Article 19 only in a footnote, but evidently considered alteration of a
delivery term to be a material modification and thus a counteroffer, not an acceptance. Id., at *25,
n.7.

310.See Oberster Gerichtshof [Supreme Court][OGH], 2 Ob 58/97, Mar. 20, 1997, [(Aus.)], available at [<http://cisgw3.law.pace.edu/cases/970320a3.html>] (remanding a case to determine if a modification by the seller regarding specifications of the product was favorable to the buyer).

315. Claude Witz, Case Commentary, The First Decision of France's Court of Cassation Applying the U.N. Convention on Contracts for the International Sale of Goods, (1995), available at <http://cisgw3.law.pace.edu/cases/950104f1.html> (criticizing the lack of rigor with which both the
Paris Court of Appeals and the Court of Cassation treated the issues raised by the case).

318.Id. at *8. The Supreme Court of Spain took a similar approach in a case where one party
attempted to renegotiate the price of a concluded contract and the proposed modification was not
accepted. See Internationale Jute Maatschappij BV v. Marín Palomares S.L., Tribunal Supremo,
[Supreme Court] 454/2000, Jan. 28, 2000 (Spain), available at
<http://cisgw3.law.pace.edu/cases/000128s4.html> [English translation by Alexandro Osuna González, translation edited by Patricia Rincón Martín]. Finding that the original contract was not impaired
by the subsequent attempt to modify, the court cited Article 19: "a reply to an offer which purports
to be an acceptance but contains additions, limitations or other modifications is a rejection of the offer
and constitutes a counter-offer." Id. The court's reasoning is difficult to ascertain as it referred
primarily to Spanish civil law and its previous rulings throughout the opinion, but approach appears
consonant with that of the U.S. court.

319.See, e.g., John E. Murray, Jr., The Neglect of the CISG: A Workable Solution, 17 J.L. &
Com. 365, 378-79 (1998) (endorsing Professor Michael Bonell's idea that UNCITRAL should create
a board similar to that of the National Conference of Commissioners on Uniform State Laws for the
Uniform Commercial Code to provide interpretations and illustrations for each Article.) [available at <http://cisgw3.law.pace.edu/cisg/biblio/murray1.html>]; see also
Bailey, Facing the Truth, supra note 6, at 276 (arguing that the CISG undermines its goal of
uniformity for a variety of reasons including the obscurity of its rules on interpretation, its provisions
on contractual freedom, and its allowance for reservations and suggesting that uniformity would be
improved by measures such as UNCITRAL review of CISG court decisions as well as the official
adoption of the Secretariat Commentary to the 1978 draft).

361.See, e.g., Int'l Chamber Of Commerce, Pub. No. 7565/1994, 6 ICC Int'l Ct. of Arb. Bull.
64-66 (Nov. 1995) (refusing to imply a derogation from Article 38 on the basis of a related provision
fixing a thirty day time limit to file a request for arbitration upon the failure of negotiation).

363.See, e.g., OLG Saarbrücken 1 U 69/92, Jan. 13, 1993, supra note 299 (eight day period
for the provision of notice of non-conformity in the purchase of doors); LG Hannover 22 O 107/93,
Dec. 1, 1993, supra note 365 (ten day period for the provision of notice of non-conformity in the
purchase of shoes).

388.Id. Similarly, in a case involving the purchase of plastic granulate by an Austrian buyer
from a German seller, the court held that the Danish end user's notice of defects one month after
delivery was untimely. OLG München 7 U 3758/94, Feb. 8, 1995, supra note 347. This conclusion
was further bolstered by the Austrian buyer's additional two month delay in communicating this notice
of non-conformity to the German seller. Id.

393.Id. (fourteen days after delivery for the provision of notice of non-conformity in the sale of
cashmere textiles); see also OLG Saarbrücken 1 U 69/92, Jan. 13, 1993, supra note 299 (eight days
after delivery for the provision of notice of non-conformity in the sale of doors); LG Hannover, 22 O
107/93, Dec. 1, 1993, supra note 362 (ten days from the date of delivery for the provision of notice
of non-conformity in the sale of shoes).

395.See Maritime Comm. Ct. of Copenhagen, H-0126-98, Jan. 31, 2002, supra note 342
(non-conformity of species of fish sold by Danish seller to Russian buyer easily detectable from
examination of the label and packaging); see also OLG München 7 U 4427/97, Mar. 11, 1998, supra
note 301 (spot checks of cashmere textiles by the German buyer at the time of their delivery by the
Italian seller would have disclosed defects).

396.See OLG Koblenz 2 U 580/96, Sept. 11, 1998 (F.R.G.) (non-conformity of chemicals
purchased by Moroccan buyer from German seller were readily apparent when chemicals were
utilized to manufacture plastic tubes one month after delivery) available at
<http://cisgw3.law.pace.edu/cases/980911g1.html> [English translation by Todd J. Fox, translation edited by Ruth M. Janal]; see also OLG Karlsruhe 1 U 280/96, June 25, 1997,
supra note 346 (non-conformity of adhesive foil covers purchased by Austrian buyer from German
seller was readily discoverable at the time of their subsequent processing); HA ZA 95-640, Mar. 5,
1997, supra note 344 (non-conformity of fish purchased by Dutch buyer from French seller was readily
apparent upon processing, which should have occurred as soon as practicable after delivery given the
perishable nature of the product).

400.See, e.g., LG Trier 7 HO 78/95, Oct. 12, 1995, supra note 358 (holding that inspections to determine if wine had been adulterated with water were not customarily undertaken in the wine industry).

401.See OLG Thüringener 8 U 1667/97, May 26, 1998 (F.R.G.) (excusing untimely notice by
a German buyer of live fish from a Czech seller on the basis that only a health professional could have
determined that the fish suffered from a viral infection at the time of their delivery), available at
<http://cisgw3.law.pace.edu/cases/980526g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen].

408. LG Erfurt, 3 HKO 43/98, Jul. 29, 1998, supra note 403 (soles). See also Trib. di Vigevano,
July 12, 2000, n. 405, supra note 340 (buyer did not retain samples of vulcanized rubber for trial and
thus were unable to prove that seller sold defective rubber for shoes). Another German court reached
the same conclusion with respect to a notice given by a German purchaser of leather goods from an
Italian seller that the merchandise was "badly stamped" and incapable of sale to customers. OLG
München 7 U 2070, Jul. 9, 1997 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/970709g1.html> [English translation by Tobias Koppitz].

414. LG Marburg 2 O 246/95, Dec. 12, 1995 supra note 412 (sale of agricultural machinery).
Furthermore, as previously noted with respect to integrated systems, the serial numbers and dates of
delivery of such components must be included in the notice in order to spare the seller the
inconvenience of researching the sales documentation with respect to all of the components or
deliveries.

417.See E. Allan Farnsworth, The Vienna Convention: An International Law for the Sale of
Goods, in Private Investors Abroad -- Problems and Solutions in International Business 121, 127, 134 (Martha L. Landwehr ed. 1983).

438.See, e.g., Trib. of Int'l Commercial Arbitration at the Chamber of Commerce & Indus., supra note 437 (Russian buyer could not excuse failure to obtain letter of credit because of an absence of funds).

439.See OGH, 10 Ob 518/95, Feb 6, 1996, supra note 134 (failure of German seller to name
the port of origin of the goods causing the Austrian buyer to be unable to obtain a letter of credit).

452.See, e.g., KG St. Gallen, Gerichtskommission Oberrheintal, OKZ 93- 1, Jun. 30, 1995
(Switz.), available at <http://cisgw3.law.pace.edu/cases/950630s1.html> (holding that the buyer was
obligated to pay for gates upon their delivery and installation upon the buyer's premises).

453.See, e.g., KG St. Gallen, 3 ZK 96-145, Aug. 12, 1997 (Switz.), available at
<http://cisgw3.law.pace.edu/cases/970812s1.html> (rejecting the claim of a Swiss buyer that it was not
obligated to pay the purchase price for clothing delivered by a German seller due to the seller's failure
to obtain necessary documents to allow the goods to clear Swiss customs).

468.Id. at art. 62. Furthermore, the seller may require the buyer to perform its contractual obligations, including payment of the price and taking of delivery, unless the seller has resorted to remedies inconsistent with this requirement.

483.Id.See also, LG Ellwangen 1 KfH O 32/95, Aug. 21, 1995 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/950821g2.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen] (German court determined that the period of time
established by a German buyer for delivery of conforming goods by a Spanish seller of paprika was
reasonable on the basis that the buyer only declared the contract to be avoided two weeks after the
expiration of the original additional period of time to perform).

484. Furthermore, even if the initial period of time granted by the buyer is not reasonable, it may
be rendered reasonable by delays in the buyer's declaration of avoidance. However, buyers would
be wise to note that general demands to the seller to perform "promptly" or "as soon as possible" may
be insufficient to meet the requirements of Article 47.

486.See OLG Hamburg 1 U 143/95, Jul. 4, 1997 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/970704g1.html> [English translation by Julian Waiblinger]. However, the seller's statement that it could not presently perform the contract does not constitute a definitive refusal to perform.

487.See Schiedsgericht der Handelskammer [Arbitral Tribunal] Hamburg, Partial Award of
March 21, 1996, CLOUT Case No. 166, available at
<http://cisgw3.law.pace.edu/cases/960321g1.html> [English translation by ICCA]. The buyer is not required to grant the seller
additional time to perform as a precondition to declaring the contract to be avoided if the seller states
that it will only perform upon the buyer's satisfaction of additional terms not within the parties'
original agreement or upon a renegotiation of the contract between the parties.

496. AG München 271 C 18968/94, Jun. 23, 1995 (F.R.G.), supra note 488. In addition, a
substantial and serious injury may occur in the event the non-conforming goods are sold by the buyer
to third parties which in turn results in stoppage of their production and resultant claims of damages
against the buyer. Id.

498. AG München 271 C 18968/94, June 23, 1995, supra note 488. Other damages recoverable
by the buyer include loss of value of the goods because of delivery delays and additional
transportation costs incurred by the buyer as a result of such delays. See Joachim v. La Sarl Holding
Manin Riviere, CA Grenoble, Cass. Com., RG 93/4879, Apr. 26, 1995 (Fr.), available at
[<http://cisgw3.law.pace.edu/cases/950426f1.html>] [English translation by Charles Sant 'Elia].

499.See, e.g., HG Zürich, HG 920670, Apr. 26, 1995 (Switz.), available at
<http://cisgw3.law.pace.edu/cases/950426s1.html> (concluding that a flaw in a salt water container
resulting in leakage was easily repairable and thus did not constitute a fundamental breach of contract
between the Swiss seller and the German buyer).

500.See, e.g., OLG Braunschweig 2 U 27/1999, Oct. 28, 1999 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/991028g1.html> [English translation by Jarno Vanto, translation edited by Ruth M. Janal] (relieving the German seller of its obligation to
deliver frozen meat on the basis of the Belgian buyer's failure to remit advance payments as provided
in the contract).

503. It bears to note that the outer bounds of what constitutes a "minor delay" have not been
enunciated by the national courts in their opinions to date. See, e.g. , LG Oldenburg 12 O 2541/95,
Mar. 27, 1996 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/960327g1.html> (concluding
that a delay of one day in tendering performance does not constitute a fundamental breach of contract
in the absence of contractual provisions to the contrary).

505.Id. An additional relevant consideration in this regard is whether the seller sought to avoid or mitigate injury resulting from the delay through a grant of additional time to the buyer for its performance.

507.See, e.g., Helen Kaminski PTY Ltd. v. Mktg. Australian Prods., Inc., 97 Civ. 8072A, 1997
U.S. Dist. LEXIS 10630 (S.D.N.Y. July 21, 1997); see also Supreme Court of Queensland [Q.S.
Ct.], Down Investments v. Perwaja Steel, Nov. 17, 2000 (Aust.); Kh Hasselt, AR 1849/94, May 2,
1995, (Belg.), available at <http://cisgw3.law.pace.edu/cases/950502b1.html>; One arbitral panel has
refused to conclude that the buyer's failure to open or establish a letter of credit automatically
constitutes a fundamental breach of contract. See Int'l Chamber of Commerce 7585/1992, ICC Int'l
Ct. of Arb. Bull. 60-64 (Nov. 1995). Nevertheless, this holding may be disregarded to the extent that
the court found an independent basis for determining the existence of a fundamental breach of
contract, specifically, the buyer's initial failure to perform its contractual obligations within the period
of time between the buyer's failure and the time the seller declared the existence of a fundamental
breach.

509.See OLG Hamm 8 U 250/91, Jan. 25, 1993 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/930125g1.html> (refusal to accept delivery of 120 tons of bacon
tendered by an Italian seller pursuant to a contract for the sale of 200 tons of bacon to a German
buyer).

518. While the custom in Anglo-American and Roman legal systems is that title in identified
goods passes on the conclusion of the contract and in generic goods at the time of identification to
the contract, other legal systems vary in this respect. See Enderlein & Maslow, supra note 20, at 128.
The lex sitae is a commonly applied conflict of law rule, and transfer of property under the law of the
seller's country is effective even if not all conditions are satisfied for transfer of property under the
law of the buyer's country. Id.

519. CISG, supra note 4, at art. 67 (providing the default rule for the transfer of risk of loss).

520. INCOTERMS is a manual of 13 trade terms published by the International Chamber of
Commerce. The most recent revision of Incoterms was issued in 2000. See generally, Jan Ramberg,
ICC Guide to Incoterms 2000 (1999).

523.Id. at art. 31(c); see also Enderlein & Maskow, supra note 20, at 134 (describing the
circumstances which have to be taken into account, including the category and quantity of the goods,
their packaging, the distance which will have to be covered by transport, the available means of
transport, and existing transport routes").

534. Where, for example, the parties agreed to delivery frei Haus, delivery occurs where the
goods are handed over to the buyer at the buyer's place of business. LG Aachen 43 O 136/92, May 14, 1993 (F.R.G.), available at
[<http://cisgw3.law.pace.edu/cases/930514g1.html>].

535. Societe Anton Huber GmbH & Co. KG v. SA Polyspace, E 99-14.844, Cour de cassation,
Jun. 21, 2001 (Fr.), available at <http://cisgw3.law.pace.edu/cases/010626f1.html> (The European
Community Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial
Matters [Brussels Convention 1968] identified the place of delivery as the place of performance for
purposes of determining jurisdiction.); see Michael Joachim Bonell & Fabio Liguori, The U.N. Convention on the International Sale of Goods: A Critical Analysis of Current International Case Law -- 1997 (Part 1), 2 Uniform L. Rev., 385, 385-95 (1997) (discussing jurisdiction cases based on
identifying the place of performance of delivery under art. 31) [available at <http://cisgw3.law.pace.edu/cisg/biblio/libo1.html>].

539. Where the obligation in question is the obligation to pay, CISG, supra note 4, at art. 57,
may be used to identify the place of the obligation to pay, and jurisdiction over disputes based on the
obligation to pay may be resolved with reference to Article 57. See, e.g., CA 93/2821 Mar. 29, 1995, supra note 160.

543. Another example of confusion in this area is reflected in a German appellate court opinion
in which the parties stipulated "ex works on lorry." See OLG Koln 27 U 58/96, [Jan. 8, 1997]
(F.R.G.), available at <http://cisgw3.law.pace.edu/cases/970108g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen] (finding that, notwithstanding
the language "ex works on lorry," the parties had agreed that the buyer's place of business in Germany
would be the place of performance). In this case, however, it appears that the seller actually delivered
the goods to the buyer's principal place of business using its own people rather than a third-party
carrier. Id.

550. In addition, if the seller has held out a sample or a model to show the qualities of the goods,
the seller warrants that the goods possess the qualities exemplified in the model or sample. CISG,
supra note 4, at art. 35.

551. CISG, supra note 4, at art. 5(1). Professor Kazimierska traces this basic obligation to the
pacta sunt servanda of Roman law, the obligation to perform a contract "in a way that complies to
its terms, even if the performance becomes unfavorable for one of the parties or excessively difficult."
Kazimierska, Remedy of Avoidance, supra note 50, at 80.

556. The seller, however, remains liable for lack of conformity that occurs after the passage of
the risk of loss if the lack of conformity is due to "a breach of any of his obligations, including a
breach of any guarantee that for a period of time the goods will remain fit for their ordinary purpose
or for some particular purpose, or will retain specified qualities or characteristics." CISG, supra note
4, at art. 36(2).

562. While industrial property refers, most likely, to patents, the broader term "intellectual
property" suggests a broader set of rights including not only patents but also, registered designs,
copyrights, company names, trade names, trademarks, and other similar intangibles. See Enderlein
& Maskow, supra note 20, at 141.

576.See also BGH VIII ZR 51/95, Apr. 3, 1996 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/960403g1.html> [English translation by Dr. Peter Feuerstein, translation edited by Ruth M. Janal] (last updated Sep. 2003). The German Supreme
Court held that the CISG does not differentiate between delivery of different goods and delivery of
goods that do not conform to the contract. The court noted that the CISG diverged from German
civil law on this point, citing scholarly commentary as authority.

581.Id.; But see Cass. ass. Plen., Dec. 17, 1996, D. 1997, 337 (Fr.), available at
[<http://cisgw3.law.pace.edu/cases/961217f1.html>] [English translation by Annabel Teiling, translation edited by Dr Loukas Mistelis]
(distinguishing between the application of "latent defect" in the French Civil Code and Article
31(2)(a) in such as way as to apply the homeward trend law in the face of conflicting CISG
jurisprudence). Similarly, in 2000, the Swiss Federal Supreme Court rejected "homeward trend"
attempts by the parties to impose concepts of local law in a dispute over whether a rotary printing
machine met contract specifications. Under Swiss law, issues associated with the impressions of the
buyer with respect to the quality of the goods would have been significant, or even dispositive. The
Supreme Court overturned the Court of First Instance, applied CISG Article 35(1), and relied upon
authoritative commentary for its application. Roland Schmidt GmbH c. Textil-Werke Blumenegg
[Supreme Court], 4C.296/2000/rnd Dec. 22, 2000 (Switz.), available at
<http://cisgw3.law.pace.edu/cases/001222s1.html> [English translation by Ruth M. Janal].

590. A U.S. example of the proper application of CISG interpretive methodology is Medical
Marketing International, Inc., v. Internazionale Medico Scientifica, S.R.L., 99-0380, 1999 U.S. Dist.
LEXIS 7380, at *6 (E.D. La. May 17, 1999), available at
<http://cisgw3.law.pace.edu/cases/990517u1.html>. The District Court cited a German Supreme Court
case for the proposition that Article 35 of the CISG does not require the seller to supply goods that
conform to laws and regulations in effect in the buyer's country. See Einscheidunger des BGH VIII
ZR 159/94, Mar. 8, 1995 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/950308g3.html> [English translation by Walter, Conston, Alexander & Green, P.C., editors: William M. Barron, Esq. & Birgit Kurtz, Esq.] (last
updated Dec. 2003). The German case involved the sale of New Zealand mussels by a Swiss
company to a German importer. The cadmium content of the mussels exceeded the allowable limits
under German law but was acceptable under Swiss law. The decision process under Article 35
required the court to first determine whether a violation of government regulations constitutes a
defect under Article 35(2)(a), which requires that the goods be "fit for the purposes for which goods
of the same description would ordinarily be used or whether the regulations are simply a feature of
the local environment affecting use of the goods. Since health, safety, and environmental regulations
vary dramatically from country to country, the real question -- assuming that regulations affect fitness
of purpose -- is whether it is the regulations of the seller's country or the buyer's country that affect
fitness." CISG, supra note 4, at art. 35(2)(a). The German Supreme Court held for the seller's
country, unless the buyer stipulated its own country requirements should have been met. The German
court depended heavily upon authoritative commentary to reason to this conclusion, stating:
"According to the absolutely prevailing opinion in the legal literature, which this Court follows, the
compliance with specialized public law provisions of the buyer's country or the country of use cannot
be expected." BGHZ, VIII ZR 159/94, supra note 590; see generally, Peter Schlechtriem, Case
Commentary, Conformity of the Goods and Standards Established by Public Law: Treatment of
Foreign Court Decision as Precedent, available at <http://cisgw3.law.pace.edu/cases/990517u1.html>
(last updated Dec. 2003); Andrew J. Kennedy, Recent Developments: Non-conforming Goods Under the CISG -- What's a Buyer to Do?, 16 Dick. J. Int'l L. 319 (1998). An abundant literature has
chronicled and commented upon this decision. See, e.g., Honnold, Uniform Law for International
Sales, supra note 53; Karollus, Cornell Review of the CISG (1995) 51 [Arts. 67-68] (comment on
conformity-of-the-goods ruling); Schwenzer in Schlechtriem, Commentary on the UN Convention
on the International Sale of Goods 280 (1998) [Art. 35] at n.57; Bernstein & Lookofsky,
Understanding the CISG in Europe, 2d ed. (2003), § 2-8 at n. 113 & § 4-7 at n.94. The Medical
Marketing decision is an example of the convergence in CISG interpretation based first on learned
commentary and then the integration of the thinking of the best foreign decisions on the given issue.
Courts in both Argentina and Austria came to similar results drawing upon reasoning from other
national courts' experience to produce more uniform interpretation of the CISG. See Second Instance
Court of Appeal, Apr. 24, 2000, (Arg.), available at <http://cisgw3.law.pace.edu/cases/000424a1.html>; OG 2 Ob 100/00w, Apr. 13, 2000 (Aus.) available at
<http://cisgw3.law.pace.edu/cases/000413a3.html> [English translation by Schönherr Rechtsanwälte OEG, Vienna, Austria, editor: Dr. Elke Napokoj, Esq.]. The Austrian court noted,

"[a] seller cannot be expected to know all special rules of the buyer's country or the country of
usage ... . It is rather for the buyer to observe her country's public law provisions and specify these
requirements -- either according to Art. 35(1) or (2)(b) CISG -- in the sales contract ... [t]he
requirements of the buyer's country should only be taken into account if they also apply in the seller's
country, in they are agreed on, or if they are submitted to the seller at the time of the formation of
the contract, according to Art. 35(2)(b)."

This use of uniformity principle is not without critics. See, e.g., Fletcher, Several Texts, supra note 6, arguing that the German court applied an unduly rigid standard of uniformity.

607. The other cases involving Article 35(3), which negates implied warranties if at time of the
conclusion of the contract the buyer knew of the non-conformity, tend to involve the factual question
of what the buyer knew, and when. See generally Tribunal Cantonal Valais, CI 97 167 28, Oct. 28,
1997 (Switz.), available at <http://cisgw3.law.pace.edu/cases/971028s1.html>; see also Só og
Handelsretten [Maritime Commercial Court] 31 H-0126-98, Jan. 31, 2002, supra note 341; OLG
Köln 22 U 4/96, available at <http://cisgw3.law.pace.edu/cases/960521g1.html> [English translation by Dr. Peter Feuerstein, translation edited by Chantal Niggemann]. A 1996 German case
provided an opportunity for an appellate court to place a gloss on 35(3), denying the defendant the
ability to invoke the provision where he himself had engaged in fraud. The case involved the
international sale of a late model apparently low mileage car in which the date of original sale had
been adjusted. The buyer resold the car to someone who detected the deception and exacted
damages, which the buyer sought to recover from the seller. The German court denied the seller
access to the defense that the buyer could have detected the car's lack of conformity to the contract
because the seller himself knew of the age of the car and thus behaved fraudulently. "The [seller] thus
had to reckon that the delivery of non-conforming goods would make the [buyer] liable towards his
customer." Id.

620.See generally, Robert Koch, The Concept of Fundamental Breach of Contract under the
United Nations Convention for the International Sale of Goods, in, Review of the Convention on
Contracts for the International Sale of Goods, 1999, at 177-354, available at
<http://cisgw3.law.pace.edu/cisg/biblio/koch.html>.

622.Id. at art. 45(1); see also OLG Koln 27 U 58/96, Jun. 14, 1994, supra note 543. This
German case provided an opportunity for interpretation of Article 45(1). A Dutch seller delivered
tannery machines to a German buyer, but he retrieved them to make adjustments. The seller agreed
to return the machines at a certain time. When he failed to do so, the buyer was forced to contract
with a third-party for the tanning of hides. The seller's suit for the price of the machines was met with
a counterclaim against the seller for the expense of covering with the third party contract. The Seller
argued that the failure to perform a secondary obligation collateral to the contract did not give rise
to a claim for damages under the CISG Article 45(1).

623.See Enderlein & Maskow, supra note 20, at 177. Enderlein and Maskow describe the right
to require performance of the contract in Article 46 as "an expression of the maxim pacta sunt servanda." They note that specific performance is a secondary remedy under the common law
principles and in the UCC, but in theory it is more available under civil codes. See also, Siegfried
Eiselen, A Comparison of the Remedies for Breach of Contract under the CISG and South African
Law, in Aufbruch nach Europea (Basedow et al. eds., 2001) available at
<http://cisgw3.law.pace.edu/cisg/biblio/eiselen2.html> (comparing specific performance in Article 46(1)
with principles drawn from common law countries).

637.See generally, Catherine Piche, The Convention on Contracts for the International Sale of Goods and the Uniform Commercial code Remedies in Light of Remedial Principles Recognized under U.S. Law: Are the Remedies of Granting Additional Time to the Defaulting Parties and of Reduction of Price fair and Efficient Ones?, 28 N. Int'l L. & Com. Reg. 519 (2003).

638.See generally, Koch, supra note 620, at 300 (discussing the relationship of seller's
fundamental breach and the right of avoidance).

646. Unfortunately, the jurisprudence has been divergent and has shown homeward trend
tendencies. FCF S.A. v. Adriafil Commerciale S.r.l., Schweizerisches Bundesgericht [Supreme
Court] [BGer] 4C.105/2000, Sept. 15, 2000 (Switz.), available at
<http://cisgw3.law.pace.edu/cases/000915s2.html> [English translation by Alban Renaud, translation edited by Claude Witz and Julia Eisengräber]. In this case, a Swiss court used language that to
the common law lawyer appears to reflect a homeward trend in its mode of interpretation. The court
was faced with contract for cotton to be delivered between certain dates, with payment to be made
by letter of credit due 60 days after the date of customs clearance. The buyer and seller contracted
for a series of cotton deliveries that, to condense the facts, did not materialize according to the times
specified in the contract. The buyer sued for the costs of cover, and the seller complained that the
buyer had unilaterally cancelled the contracts with no justification. One of the issues for the court was
the significance of avoidance under Article 49(1). Citing commentary on the CISG, the court
characterized avoidance under the CISG in this manner: "It is not an avoidance in the juridical way
of the words with effects ex tunc, but a resolution which releases both parties from their contractual
obligations yet to be executed and which executes itself ex nunc." Id. The court in explaining its
decision in a manner sensible to Swiss lawyers is doing so at the expense of hindering the
development of uniform concepts.

651. BG T 171/95, Feb. 20, 1997, supra note 436. Yet another German court held that a
cancellation of the "order of March 1990" was insufficient notice of avoidance. LG Frankfurt 3/11
O 3/91, Sept. 16, 1991 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/910916g1.html> [English translation by Stefan Kuhm]. A subsequent court found the contents of a buyer's telegram to seller to be a sufficiently specific declaration of avoidance. "An explicit reference to the avoidance of the contract, pursuant to the
CISG, was not required for the validity of the legal effects of the avoidance of the contract .... It
was sufficient that the [buyer] made clear that she wouldn't pay the [seller's] bill because of her breach
of contract." OLG Frankfurt 5 U 164/90, Sep. 17, 1991 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/910917g1.html> [English translation by Vivian Curran and Daniela Lichti].

652. ICA Arbitral Tribunal 2/1995, May 11, 1997. It cited an earlier arbitral decision which held
that an arguably late declaration of avoidance by a buyer was excused by bad faith behavior of the
seller. ICC Arbitration Case No. 7645 of March 1995, available at
<http://cisgw3.law.pace.edu/cases/957645i1.html> [English text].

655. Article 49(1)(b) permits the buyer to avoid the contract if the seller does not deliver the
goods within the time frame permitted under the time extension provision of Article 47. The right
to avoidance can be lost for failure to provide additional time under Article 47. See, e.g., OLG Köln
U 202/93, Feb. 22, 1994, supra note 237. The question arises, in interpreting this article, of the
timeliness of the buyer's declaration of avoidance following the expiration of the additional time
period given pursuant to Article 47. Often this is a judgment based on the nature of the goods and
the circumstances of the parties. In a German case involving the sale of printing machines by a
German seller to an Egyptian buyer, an additional period of two weeks was provided to the seller.
When the machines still had not been delivered seven weeks after the additional time was announced,
the buyer declared avoidance of the contract, and the court found this to be within a reasonable time
period. OLG Celle 10 U 76/94, supra note 481. Another German district court reached the same
result on similar facts that year, noting contrary scholarly authority. LG Ellwangen 1 KfH O 32/95,
Aug. 21, 1995, supra note 483.

660. "In this kind of commercial transaction, a reasonable time for notice is most often very
short, at most a few months. To extend this period would require pressing circumstances indeed."
HO Turku, Apr. 12, 2002 (Fin.), available at <http://cisgw3.law.pace.edu/cases/020412f5.html>.

661.See Piche, supra note 637, at 548, 558-65 (tracing the principle of price reduction to the
actio quanti minoris of Roman law through the Justinian Compilations, and explaining the
justifications for the price reduction remedy).

662. There is some controversy among commentators with respect to whether a non-conformity
of quantity, as opposed to quality, justifies a price reduction. Piche, supra note 637, at 551.

663. Enderlein & Maskow, supra note 20, at 196; Piche, supra note 637, at 555. The buyer may
not reduce the price if the seller has remedied his failure to perform in accordance with Article 37 or
Article 48 or if the buyer refuses to accept performance by the seller in accordance with those
Articles. CISG, supra note 4, at art. 50.

666.See, e.g., LG Aachen 41 0 198/89, Apr. 3, 1989, supra note 346. See also Tampere Court
of First Instance, Jan. 17, 1997, supra note 567 (the court held, however, that the right of price
reduction for non-conforming goods is "independent of whether the buyer has sold the goods further
and at what price or whether the buyer has been subject to complaints or demands for
compensation"); Canton of Ticino: Pretore della giurisdizione di Locarno Campagna, Apr. 27, 1992,
supra note 664 (rejecting a seller's plea that the price reduction should equal the cost of repairing the
non-conforming goods, in favor of the Article 50 measure of reduction based on proportionality of
value).

676.Id. at 338, (citing In re Daewoo Int'l (Am.) Corp., No. 01-Civ-8205, 2001 U.S. Dist.
LEXIS 19796, at *8 (S.D.N.Y. Dec. 3, 2001)). Because there was a question of fact, however, as
to whether the seller fulfilled its contractual obligations regarding the specifications of the goods
before they passed the ship's rail, the court ordered the district court to permit the parties to conduct
discovery on this limited issue. Id. at 339. German courts have likewise held that under Article 67
the seller is not responsible for the depreciation of goods. OLG Schleswig 11 U 40/01, Aug. 22,
2002 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/020822g2.html> [English translation by Veit Konrad, translation edited by Mark Beamish]. Another German court
held that a seller is not responsible for subsequent damage to goods once they are handed over to the
carrier. AG Duisburg 49 C 502/00, April 13, 2000, (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/000413g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen]. In that case, the court held that Article 67 applied
because the buyer was not able to prove that there was an agreement between the parties for risk of
loss to pass to the buyer at a different location. A third German court stated that a seller is only liable
for a defect if it gave a mandate to the carrier regarding the means of shipment. OLG Schleswig-Holstein 11 U 40/01, Aug. 22, 2002, supra note 676. An Argentina court reached the same
conclusion and held that after the risk of loss passed to the buyer, it was obligated to pay the purchase
price unless the loss or damage to the goods was due to an act or omission of the seller. CN Buenos
Aires 47.448 (Bedial, S.A. v. Paul Müggenburg and Co. GmbH), Oct. 31, 1995 (Arg.), CLOUT Case
No. 191, available at [<http://cisgw3.law.pace.edu/cases/951031a1.html>].

684.Id. at art. 25. See generally, Koch, supra note 620 (discussing the concept of fundamental
breach under the CISG); Clemens Pauly, The Concept of Fundamental Breach as an International
Principle to Create Uniformity of Commercial Law, 19 J.L. & Com. 221, 229-32 (2000) (discussion
includes German concepts related to fundamental breach, including the fact that German sales law
does not distinguish between general and fundamental breach).

688.See generally, Seig Eiselen, Remarks on the Manner in Which the UNIDROIT Principles
of International Commercial Contracts may be Used to Interpret or Supplement Articles 71 and 72
of the CISG (Sept. 2002) available at <http://cisgw3.law.pace.edu/cisg/principles/uni71,72.html> (using
the UNIDROIT principles as an aid to the interpretation of Articles 71-71 of the CISG); Seig
Eiselen, Remarks on the Manner In Which The Principles of European Contact Law May Be Used
to Interpret or Supplement Articles 71 and 72 of the CISG (Sept. 2002) available at
<http://cisgw3.law.pace.edu/cisg/text/peclcomp71,72.html> (using the European Union legal principles
as an aid to the interpretation of Articles 71-71 of the CISG).

698.Id. at art. 73(2). As is the case in other instances of avoidance, however, notice must be
provided to the other party within a reasonable time. Id. Note that a buyer who declares the contract
avoided in respect to any delivery may, at the same time, declare it avoided in respect to deliveries
already made or of future deliveries if, by reason of interdependence, those deliveries could not be
used for the purpose contemplated by the parties at the time of the conclusion of the contract. Id. at
art. 73(3).

699.See, e.g., FCF S.A. v. Adriafil Commerciale S.r.l., BGE 4C.105/2000, supra note 646
(breach must concern the essential content of the contract, the goods, or the payment of the price
concerned, and it must lead to serious consequences to the economic goal pursued by the parties).

716.Id. Compare FCF S.A. v. Adriafil Commerciale S.r.l., BGE, Sept. 15, 2000 (Switz.),
available at <http://cisgw3.law.pace.edu/cases/000915s2.html> [English translation by Alban Renaud, translation edited by Claude Witz and Julia Eisengräber]. That case involved a buyer who
purchased shoes through a commercial agent. After the buyer learned that identical shoes made by
an Italian manufacturer were being offered for sale by a competing retailer at a considerably lower
price, the buyer attempted to avoid the contract. Holding that the buyer was not entitled to avoid the
contract, the court stated that there was no fundamental breach because the manufacturer had no
knowledge about the branches of its business partners. Ultimately, the two cases can be reconciled
under the principle that an ancillary obligation can only be a basis for a fundamental breach when it
goes to the principle performance under the contract. See, e.g., LG Frankfurt 3/11 O 3/91, Sept. 16,
1991, supra note 651.

718. LG Berlin 99 O 123/92, Sept. 30, 1992 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/920930g1.html>. The chance of a breach should be "clear" or
obvious to anyone. In German, the standard is defined by the words "it is clear" or offensichtlich.
Id. For example, in a German case, a seller delivered the goods to a third-party's warehouse; after
the third-party declared bankruptcy and the goods disappeared, the seller attempted to collect the
alleged outstanding purchase price from the buyer. The court held that the buyer was not obligated
to pay the purchase price, because the seller did not prove that the goods were lost after the risk
passed to the buyer. OLG Hamm 19 U 127/97, Jun. 23, 1998, supra note 544. Parties are generally
allowed to avoid a contract under similar circumstances under Article 72. For example, a buyer was
entitled to terminate a contract concerning non-delivered goods where the seller only made a partial
delivery after the price of the goods rose significantly. Arbitration Court attached to the Hungarian
Chamber of Commerce and Industry, Vb/97142, May 25, 1999 (Hung.), CLOUT Case No. 265,
available at [<http://cisgw3.law.pace.edu/cases/990525h1.html>]. In another case, a seller was
entitled to avoid a contract after the buyer failed to settle other bills with the seller. The buyer
ordered 140 pairs of winter shoes from the seller; after the shoes were manufactured, seller demanded
security for the sales price as the buyer still had other unsettled bills with the seller. Because the
buyer did not pay and did not furnish security, the court held that the seller had the right to avoid the
contract. OLG Düsseldorf 17 U 146/93, Jan. 14, 1994 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/940114g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen].

722.Id. In order to protect the right of avoidance, the avoiding party must give "reasonable
notice" that a fundamental breach will occur with respect to future installments. CISG, supra note
4, at art. 73(2). See generally HG Zürich, HG 930634, Nov. 30, 1998, supra note 339.

730.Id. at art. 72(2). The plain language of Article 72 reveals that a party needs to "simply
allege (1) that the defendant intended to breach the contract before the contract's performance date
and (2) that such breach was fundamental." Magellan Int'l Corp. v. Salzgitter Handel GmbH, 76
F.Supp.2d 919, 925-26 (N.D. Ill. 1999).

731.See generally BGH VIII ZR 18/94, Feb. 15, 1995, supra note 654. One way that
reasonable notice is given is when goods are examined upon receipt and a message is promptly faxed
noting the non-conformity. See generally HO Helsinki, S 96/1215, Jun. 30, 1998 (Fin.), available at
<http://cisgw3.law.pace.edu/cases/980630f5.html> [English translation by Jarno Vanto].

732. CISG, supra note 4, at arts. 74-76. See generally Harry M. Flechtner, Remedies Under the
New International Sales Convention: The Perspective from Article 2 of the U.C.C., 8 J.L. & Com.
53 (1988) (elaborating on the use of Article 2 of the UCC to interpret the remedy provisions of the
CISG) [available at <http://cisgw3.law.pace.edu/cisg/biblio/flecht.html>]; Jeffrey S. Sutton, Measuring Damages Under the United Nations Convention on the International Sale of Goods, 50 Ohio S. L.J. 737 (1989) (comparing Article 2 of the UCC with the CISG) [available at <http://cisgw3.law.pace.edu/cisg/biblio/sutton.html>].

738. Issues of proof can be raised as to whether a substitute purchase was carried out at the
price claimed or whether the purchase is justifiable. LG Braunschweig 21 0 703/01 (028), Jul. 30,
2001 (F.R.G.), available at <http://cisgw3.law.pace.edu/cases/010730g1.html> [English translation by Dr. Andrea Vincze]. A plaintiff, however,
is not obliged to resell the goods before the date of avoidance. OLG Düsseldorf 17 U 146/93, Jan.
14, 1994, supra note 718 (resale nearly two months after avoidance was still within a reasonable
time). Furthermore, a substitute purchase cannot replace a notice of declaration of avoidance of a
contract. OLG Bamberg 3 U 83/98, Jan. 13, 1999 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/990113g1.html> [English translation by Ruth M. Janal]. Likewise, once avoidance of the contract is clear,
a buyer does not need to wait before purchasing substitute goods. FCF S.A. v. Adriafil Commerciale
S.r.l. BGE, 4C.105/2000, supra note 646 (except in the case in which the seller could prove that the
buyer was able to find goods at a more favorable price).

740. CISG, supra note 4, at art. 76. The "current price" is that for goods of the contract
description in the contract amount; the concept of "current price" does not require the existence of
official or unofficial market quotations, but the lack thereof may raise the question whether there is
a current price for the goods. Secretariat Commentary to Art. 76, available at
<http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-76.html>.

741. CISG, supra note 4, at art. 76. See KG Zug, A3 1997 61, Oct. 21, 1999 (Switz.), available at <http://cisgw3.law.pace.edu/cases/991021s1.html> [English translation by Dr. Andrea Vincze] (court held that damages resulting from non-performance of the contract by the seller had to be assessed on the basis of an abstract calculation
under Article 76).

742. OLG Celle 3 U 246/97, Sept. 2, 1998 (F.R.G.), available at
<http://cisgw3.law.pace.edu/cases/980902g1.html> [English translation by Ruth M. Janal, translation edited by Camilla Baasch Andersen] (the court was not able to make a calculation under
Article 76 for damages because the buyer failed to present any evidence of the current market price
of the goods).

753.Id. at 1029-30. See also HG Zürich, HG 95 0347, Feb. 5, 1997, supra note 618 (buyer
proved that it had the opportunity to resell the first shipment from the seller at a higher price)
compare OLG Celle 3 U 246/97, Sept. 2, 1998, supra note 742 (court held that the buyer was not
entitled to a claim for loss of profit, in view of the fact that it had omitted to assess its damages on
the basis of a specific calculation as required by art. 74).

754. Delchi Carrier S.p.A, 71 F.3d at 1030. In so doing, the Second Circuit disagreed with
lower court holdings that denied recovery of such damages as "double recovery." Id.

790.See, e.g., BGH VIII ZR 121/98, Mar. 24, 1999, supra note 95. The German Supreme
Court considered a seller's liability for the delivery of non-conforming goods when the seller was only
acting as an intermediary. In that case, the non-conformity was caused during the time the goods
were in the control of either his supplier or his supplier's supplier.

791.See generally Dionysios Flambouras, Remarks on the Manner in Which the PECL may be
Used to Interpret or Supplement Article 79 CISG (May 2002), available at
<http://cisgw3.law.pace.edu/cisg/text/anno-art-79.html> (the drafting history of the CISG reveals that
Article 79 is a stricter version of its predecessor which was criticized for excusing non-performance
too readily, such as where performance merely became more difficult). See generally FCF S.A. v.
Adriafil Commerciale S.r.l., BGE, supra note 646 (determinative facts do not reveal the existence of
circumstances that may constitute an unforeseeable or unavoidable impediment or an obstacle that
the party could not have reasonably overcome).

798. Schiedsgericht der Handelskammer, Hamburg 1996, 3229, Mar. 21, 1996, supra note 618.
See also, OLG Hamburg 1 U 167/95, Feb. 28, 1997, supra note 704 (sellers excuse was denied when
it did not receive goods from its supplier). The seller would only be able to claim impediment if
goods of an equal or similar quality are no longer available on the market; furthermore, it is also
incumbent on a seller to bear the risk of increasing market prices at the time of the substitute
transaction. Id. The court also held that although the market price had risen to triple the agreed-upon priced, this did not amount to a "sacrificial sale price," as the transaction (sale of iron-molybdenum from China) was said to be highly speculative. Id.

799. CISG, supra note 4, at arts. 81, 83-84. For a general discussion of notice and avoidance,
see Ericson P. Kimbel, Nachfrist Notice and Avoidance Under the CISG, 18 J.L. & Com. 301 (1999).
See also Secretariat Commentary to art. 81, available at
<http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-81.html>.

801.Id. at art. 81(2). Note that if both parties are required to make restitution, they must do
concurrently. Id. A classic illustration of this situation took place when a German buyer entered into
a contract with a French seller for the delivery of sunflower oil. The buyer paid a timely installment
for the first delivery, yet the seller did not ship the goods. Accordingly, the seller had to refund the
price paid. OLG München 7 U 1720/94, supra note 701. This was also the case in a dispute
involving multiple shipments of machines. OLG Celle 20 U 76/94, supra note 481. Because the first
shipment contained only half of the machines specified by the contract, and the buyer had already paid
a considerable part of the contract price before the shipment, the court found that the parties mutually
terminated the contract. Accordingly, it found that the buyer's repayment claim was justified under
Article 81(2). Id.See also ICC Court of Arbitration no. [9978], Mar. 1999, available at
[<http://cisgw3.law.pace.edu/cases/999978i1.html>] [English text] (tribunal found that the
buyer was allowed to avoid the contract since non-delivery was a fundamental breach of contract and
awarded restitution under Article 82, along with interest under Article 84).

808.Id. at art. 84(1). See generally OLG Celle 20 U 76/94, supra note 481. However, contrary
to this provision with regard to the time of accrual of interest, an Italian court held that interest was
payable from the date of avoidance of the contract. Foliopack Ag v. Daniplast S.p.A., Pretura
circondariale [Court of First Instance] [PR] di Parma, sez. di Fidenza Nov. 24, 1989, 77/89 (It.),
available at <http://cisgw3.law.pace.edu/cases/891124i3.html> [English translation by Hanz G. Chiappetta, translation edited by Angela Maria Romito].

812.Id. at arts. 87 and 88. See generally ICC Arbitration 7531, supra note 647 (the tribunal,
without elaboration, allowed such damage costs, expenses, and losses related to the buyer's
reasonable expenses for the preservation of goods).

819.Id. at art. 88(1). See [Canton Appellate Court] [TR-C], 01 93 1308, May 17, 1994
(Switz.), available at <http://cisgw3.law.pace.edu/cases/940517s1.html> [English translation by Annabel Teiling] (seller sought to sell a base of
a product immediately in accordance with Article 88(1)).

820. Secretariat Commentary to Art. 88, Right to Reimbursement, para. 93 [sic], available at
<http://cisgw3.law.pace.edu/cisg/text/secomm/secomm-88.html> (party selling the goods has the right
to retain an amount equal to the reasonable expenses of preserving the goods and of selling them, but
he must account to the other party for the remainder of the balance). See, e.g., OLG Hamburg 1 U
31/99, Nov. 26, 1999, supra note 710.

824. Ferrari, Uniform Interpretation, supra note 15, at 184 ("[S]ince the end of the last century
and with increasing intensity since the beginning of this century, efforts have been made to ...
overcome the nationality of law.").

840.Id. at 885. The Court cites Richard Speidel, The Revision of Article 2, Sales in Light of
the United Nations Convention on Contracts for the International Sale of Goods, 16 Nw. J. Int'l L.
& Bus. 165, 173 (1995); Caroline D. Klepper, The Convention for the International Sale of Goods:
A Practical Guide for the State of Maryland and Its Trade Community, 15 Md. J. Int'l L. & Trade
235, 239 (1991); Honnold, Uniform Law for International Sales, supra note 53, § 444.

863. One exception is Article 79(1) on proving the excuse of "impediment." It states that "[a]
party is not liable for a failure to perform any of his obligations if he proves that the failure was due
to an impediment beyond his control." CISG, supra note 4, at art. 79(1) (emphasis added).

866. Trib. di Vigevano, July 12, 2000, n. 405, supra note 340. See Alessandro Rizzieri, Decision
of the Tribunal of Vigevano, Italy, July 12, 2000, 20 J.L. & Com. 209 (2001). A commentary on that
case states that "a close examination of both the legislative history of the various provisions, as well
as their wording ... elaborate[s] the general principle that each party has to prove the existence of
the factual prerequisites contained in the provision from which it wants to derive beneficial
consequence." Ferrari, Tribunale Di Vegevano, supra note 582, at 238. See also supra Part V.A.1
("courts have required the imposition of a burden on the buyer prior to granting additional time for
inspection").

872. Beijing Metals & Minerals v. Am. Bus. Ctr., Inc., 993 F.2d 1178 (5th Cir. 1993). Another
example of the use of the procedural-substantive distinction to avoid application of the CISG is Judge
Posner's opinion in Zapata Hermanos v. Hearthside Baking Co., Inc., 313 F.3d 385 (7th Cir. 2002).
Posner reasoned that attorney fees could not be given under Article 79 because they are a matter of
procedure. In reaching his decision, Posner poses a question that is left unanswered: "And how likely
is it that the United States would have signed the Convention had it thought in doing so it was
abandoning the hallowed American rule?" 313 F.3d at 389. The question begs a more substantive
response then the implied response offered by Posner. It should be remembered that the United
States failed to opt out of Article 11 and in the process jettisoning the more longstanding statute of
frauds and parol evidence rule, and in the process creating a stark contradiction between the CISG
and the UCC. But cf., OLG Düsseldorf 6 U 152/95, Jul. 11, 1996, supra note 767 (under Articles
61(1)(b) and 74, party could collect attorney fees).

884. "This problem was evidently overlooked at the creation of the CISG." Case Commentary,
Peter Schlechtriem, Conformity of the Goods and Standards Established by Public Law Treatment of Foreign Court Decision as Precedent (Andre Corterier trans., 1999), available at
<http://cisgw3.law.pace.edu/cases/990517u1.html>.